Annual
Report
A M B I T I O N
L E A D E R S H I P
D E C I S I V E N E S S
I N N O V A T I O N
C O L L A B O R A T I O N
2022
Contents
Highlights
Strategic Review
Governance Report
Governance Report
Audit Committee Report
Risk Committee Report
Page 105
Page 123
Page 130
Nomination Committee Report
Page 133
Related Party Committee Report
Page 138
Sustainability Committee Report
Page 141
Directors’ Remuneration Report
Page 144
Financial Statements
Page 159
Chair’s Introduction
Chief Executive Officer's Review
Company Overview
Our Business Model
THG Beauty
THG Nutrition and Wellness
THG Ingenuity
Chief Financial Officer Review
Section 172 Statement
Stakeholder Engagement
Page 3
Page 5
Page 8
Page 13
Page 21
Page 26
Page 32
Page 37
Page 47
Non-Financial Information Statement
Page 55
Sustainability
Task Force on Climate-related
Financial Disclosures
Risk Management
Directors’ Report
Page 57
Page 79
Page 83
Page 97
"With a strong balance sheet and category leading
positions within substantial end markets that continue
to benefit from long-term structural growth, we have
confidence in our ability to deliver long-term value for
shareholders.
Our entrepreneurial culture is prevalent across the
organisation, with our people rising to the challenges
presented to them during the year with resilience and
tenacity, with high-performing, diverse teams being
central to our ongoing success."
Click here to watch our review of the year
Matthew Moulding
Chief Executive Officer
Revenue
Adjusted EBITDA
2022
2021
2020
£2,239.2m
2022
£2,179.9m
2021
£1,613.6m
2020
Adjusted EBITDA margin
Reported operating loss
2022
2021
2020
2.9%
7.4%
9.3%
2022
2021
2020
£64.1m
£161.3m
£150.8m
£495.6m
£137.5m
£481.8m
Strategic progress
Financial performance
• THG Ingenuity gaining momentum following the pivot to
• Record sales of £2.2 billion
focus on higher value and ultimately higher margin contracts
• Successful completion of the divisional reorganisation
gross margins to support long-term customer retention
with cost savings and efficiencies implemented in FY 2022
• Significant investment in price strategy impacting
• Simplification of the Group leading to a strategic review
of loss-making categories and territories, underpinning
FY 2023 profitability improvements
• Strategic partnerships and alliances entered into across
THG Beauty, THG Nutrition and THG Ingenuity
• Lower level of profitability due to challenging
macroeconomic environment and significant
cost inflation across major cost lines
• New £156 million term loan further strengthened the
balance sheet with c. £640 million of cash and available
facilities at year end
THG Awards
#1 CIO in the UK
(Joanna Drake)
CIO UK 100 Awards
Contact Centre Support
Team of the Year
(Silver) (Group)
Call Centre Management
Association Awards
Most Exciting
Partnership
(Hotel Chocolat X Myp)
European Specialist
Sports Nutrition Alliance
10th in Top Customer
Service Experience,
Non-Grocery Retail
(Lookfantastic)
KPMG Customer
Experience 2022
Winner in the
Shopping App
Campaign category
App Growth Awards 2022
1
2
Annual Report 2022
Chair's
introduction
Charles Allen,
Lord Allen of
Kensington CBE
Independent
Non-Executive Chair
Introduction
Welcome to our 2022 Annual Report. Having been
appointed just over a year ago, I am delighted to have
had the opportunity to get to know the business over that
period and remain highly impressed with the talent and
culture which is evident throughout the organisation.
The past year has been marked by a number of external
challenges – from Covid-19 and its various impacts still
lingering in certain territories, to rising inflation and the war
in Ukraine. And whilst these external factors have impacted
consumer confidence and added inflationary pressures to
our cost base, the management team have worked hard to
mitigate their effects, pivoting to focus on cash generation,
strengthening the balance sheet, reducing costs and, in turn,
delivering a robust set of financial results.
More than that, though, these past 12 months have been one
of change and development for THG. I joined the Group as
Chair with a clear mandate: to strengthen the governance
and with Matt Moulding, the Group CEO, review and refine
the Group’s strategy. We have refreshed THG’s Board and with
Matt, developed the management team. There is still more to
do but we’ve made significant progress as I will set out below.
Board composition
and management
We continued to strengthen our Board composition during
2022, seeking to enhance the skills, experience, knowledge
and diversity and were pleased to welcome Dean Moore and
Gillian Kent as independent NEDs in September 2022, both
of whom bring significant experience and insight from their
previous industry roles. Following a review of THG’s leadership
needs, we announced two changes to the Executive
Leadership Team at the beginning of 2023 – the appointment
of Damian Sanders, former independent NED and chair of
the Audit Committee, to CFO and the appointment of John
Gallemore, the incumbent CFO, to COO.
3
During 2022 we also saw Dominic Murphy, Tiffany Hall,
Zillah Byng-Thorne and Dr Andreas Hansson step down
from the Board and I, together with my other Board
members, would like to thank them all for their valuable
contributions during their tenures with THG. Further
information on the Board changes which took place during
2022 can be found within the Governance Report and the
Nomination Committee Report.
Organisational development
In July 2022 we announced the legal completion
of the internal separation of our key trading Divisions,
an important landmark in the continued development
of the Group and a significant undertaking that was
completed on track and on time. The Board believes
that this separation provides material optionality and
flexibility for our key trading Divisions to enter into future
strategic partnerships, generating value accretion for all
shareholders. As you will see from our published accounts
for FY22, the separation allows us to report on a divisional
basis (with comparative figures for FY21 provided also),
adding a new level of transparency to our financial reporting,
and providing the opportunity to demonstrate the true value
of our three world-class businesses: THG Beauty,
THG Nutrition and THG Ingenuity.
People and diversity
Our values, culture and people have, collectively, allowed
us to make substantial progress against our strategic priorities.
The Senior Management team has demonstrated its
experience and keen ability to drive progress, and I have
been pleased to see the impressive work undertaken across
all our operating Divisions, as they grow and expand their
respective customer and client propositions.
Our ambitions to drive sustainable, profitable growth and long-
term value creation are supported by a dedicated and diverse
workforce. Retaining and developing talent is a key priority for
THG and we empower our colleagues to make a difference.
During 2022 we set out to add a fifth Company ‘value’ –
alongside Leadership, Innovation, Decisiveness and Ambition
– and were incredibly pleased with the level of engagement
from our global colleagues who overwhelmingly suggested
Collaboration as the value most reflective of their THG
experience. This selection is testament to the central place
that collaboration plays in the culture of THG, from how we
view our relationships with each other as colleagues, to the
partnerships we form with our clients to drive mutual success.
Stakeholder engagement
As Chair I have been fortunate to spend time with many
of our shareholders, particularly consulting on their views
when the Board was appraising the bid approaches
received during the first half of 2022. As we announced
to the market at the time, the Board was unanimous that
the offers were unacceptable and significantly undervalued
the Company. I have listened to Shareholder feedback
and have begun to implement positive changes to our
engagement and communications strategy which will
continue over the course of 2023.
Continued strategic delivery
Against all this, we have continued to execute our strategy
successfully and have done so whilst continuing to invest in
our future growth, rolling out fulfilment and manufacturing
infrastructure around the globe, ensuring we are well-
placed in our key territories to meet the growth demands
both of our own-brands and of our Ingenuity clients.
Our Divisions have established meaningful positions in their
respective markets and we continue to refine their strategic
focus, ensuring they are well-tuned for continued delivery
for all stakeholders. THG Beauty and THG Nutrition remain
relevant to a global consumer base who are living longer,
more digitally connected lives than ever before.
Following a change of leadership, THG Beauty is exiting
certain geographies, simplifying the offer and focusing on
higher margin products. THG Nutrition has undertaken a
strategic reframing, further diversifying from its traditional
protein-based product focus and broadening its offering to
deliver for the entire ‘wellness’ market.
This is all powered by our technology and physical
infrastructure platform, THG Ingenuity, which continues to
deliver for our stakeholders – whether they be customers,
consumers, clients or strategic partners – working with
them to support and deliver their digital commerce
journeys. Throughout the year it has gained momentum
as its strategic pivot to focus on higher value and higher
margin contracts has begun to bear fruit. Following
a detailed review of each of our divisions we have reduced
the headcount and attracted and retained the best talent.
Sustainability
As a business we are committed to driving environmental
and societal change, both through our own operations and
as a key partner for our stakeholder groups. This is driven
by our 2030 Sustainability Strategy, ‘THG x Planet Earth’,
which details our goals and targets as we pledge to use our
global scale, world-class talent and dedication to innovation
to act as a force for good.
In 2021 we invested in building our recycling capabilities,
and during 2022 we broadened the services we provide to
our Ingenuity clients through THG Eco. When it comes to
sustainable development, we understand that real impact
requires collaborative, coordinated and collective action
between businesses, the public sector and individuals.
THG Eco, part of THG Ingenuity, supports our clients,
partners and suppliers in navigating the changing
environment and demonstrating to their own suppliers
and employees their sustainability commitments.
Looking ahead
2022 saw THG – together with almost all businesses – face
inflationary challenges from a range of sources, from the
cost of raw materials, to labour, to operational fulfilment
and energy. In both facing, and trying to mitigate these
challenges, we have kept a firm focus on what sits at
the heart of THG: the customer; and, in recognising the
pressures faced by consumers globally, we made the
decision not to pass on the full extent of inflationary cost
increases to our customers. We believe that this strategy
will secure customer loyalty, retain customers within the
THG ecosystem and in turn deliver market share growth
in key territories over the longer-term.
Looking to the current financial year, I believe our category
leadership positions, our culture of innovation, our dynamic
Senior Management team, our well-invested global footprint
and our robust balance sheet will, collectively, ensure we
are well placed to deliver further growth and capitalise on
strategic opportunities at the appropriate time. All with the
ultimate goal of delivering shareholder value.
The Group’s intention to apply for a Premium Listing
remains and we are well prepared internally to progress
upon completion of the FCA’s ongoing review of the current
listing regime.
This past year has been one of change and development
for THG, and I am enthused by the prospects that lie ahead
for us as we further progress our strategic priorities in 2023.
Further information can be found within:
Chief Financial Officer Review
See page 37
Section 172 Statement Stakeholder Engagement
See page 47
Sustainability
See page 57
Governance Report
See page 105
4
Annual Report 2022
Chief Executive
Officer's Review
•
•
The previous 48 months have seen significant expansion
of our global fulfilment and manufacturing infrastructure,
with each facility requiring a full depth of stock holding
to become fully operational – which is now rationalising
as evidenced through the working capital inflow in the
year. This strategy has driven an improved service for
consumers in international territories.
In July 2022, we announced the completion of
the divisional reorganisation, increasing strategic
optionality for the future. The divisional reorganisation
has also yielded improved visibility of costs, enabling
savings to be made from reducing duplication and
greater focus. The project was very comprehensive,
and we are well on our way towards broadening
our financial reporting to better reflect the divisional
performance.
• Group headcount reduced by almost 2,000 people
during the year, largely achieved through the careful
management of attrition as well as maintaining strong
cost discipline and the roll-out of logistics automation.
•
•
To strengthen our liquidity, we agreed a new £156
million banking facility, resulting in the Group having
over £640 million of cash and facilities at the year-end.
Net debt of £181 million was better than guidance of
c.£200 million.
The Group’s Board also underwent some changes,
with the appointment of Lord Charles Allen as Non-
Executive Chairman, and the subsequent appointment
of two Independent Non-Executive Directors.
We see the Group being well progressed to deliver positive
free cash flow on a rolling 12 month basis through FY 2024,
via ongoing project delivery efficiencies including driving
working capital improvements, while not compromising
our ability to meet growing demand and deliver top-line
revenue growth.
Market outlook
Our Beauty and Nutrition divisions operate in large,
resilient and expanding total addressable markets,
with each holding prominent positions in many territories.
There are long-term trends driving category growth in our
core markets (premium beauty, health and wellness), where
we have the infrastructure and capabilities to serve following
investment in our fulfilment and distribution network.
Both our core consumer markets continued to grow
through the previous global financial crisis, and over
the last decade benefitted from the exceptional growth
Matthew Moulding
Executive Director
and Chief Executive Officer
Dear Shareholder
2022 was unquestionably the most challenging global
environment we’ve seen since founding THG nearly 20
years ago. An extraordinary backdrop of runaway inflation,
rapidly rising interest rates, and major geopolitical events
created significant macroeconomic and consumer
uncertainty. I’m incredibly proud of how THG and the team
responded to these challenges. For me, there is no doubt
that 2022 was our best performance to date, even given
the reduction in profitability year-on-year.
THG almost doubled in size during the global pandemic,
capitalising on an unprecedented movement of consumers
to online retail. As consumer behaviour has normalised,
the Group not only held onto the growth achieved during
the pandemic but went on to grow further during 2022.
This growth in market share, delivered in the most trying
of circumstances, is testament to the quality and dedication
of our people.
From the start of 2022, the Group and divisions alike
undertook decisive action to adapt their business models
to a very different market landscape, while maintaining
revenue growth in the process.
• Our Beauty and Nutrition divisions committed to
shielding consumers from what we believe to be
exceptional, short-term inflationary pressures. These
actions temporarily reduced gross margins and
profitability year-on-year, with the long-term benefits
to brand integrity underpinning stronger customer
loyalty and financial reward.
After a careful and lengthy search, Vivek Ganotra joined
as CEO of THG Ingenuity in June and was tasked with
repositioning the division away from smaller, high-volume
clients, to focus resources on our growing base of
valuable, large scale, enterprise clients.
•
5
of online participation. For example, the UK online share
of total retail sales has increased by more than 25% over
the last three years – now accounting for around 25%
of total retail sales.
Our key categories are supported by favourable dynamics,
such as high repeat-purchase rates, stable average order
values and very low return rates. This presents THG with
opportunities to grow within existing markets, and in
targeted new markets where we will be able to rapidly
scale up our presence.
Customer proposition
One of our greatest assets is our global customer base
of over 16 million THG Beauty and THG Nutrition active
customers. Our apps have been downloaded over 10 million
times from a standing start in January 2020 with our first-
party data advantage a core strength in our model, allowing
us to hold direct relationships with our consumers.
The insights gained from these customers informs our
daily decision making, and we are investing in growing
this network of passionate, engaged beauty and wellness
enthusiasts – firmly positioning us as the market leader
in this space.
We are constantly striving to become more efficient as an
organisation, while optimising the customer experience and
minimising delivery times. Through our brands, we have
reimagined how we think about beauty and nutrition – and
how this integrates into our daily lives as we increasingly
look to improve our overall health and wellbeing.
Divisional highlights
I'm pleased with the progress achieved within Ingenuity
as we pivot towards a longer-term view for sustainable
profitability, supporting major UK and international retailers
across a wide range of categories, further supported by
our expanding network of partners and strategic alliances.
THG Beauty is now firmly established as one of the
leading pure-play online retailers globally delivering
over £1.2 billion of revenue. We have set a pathway to
rebuild margins in our largest division through a focus
on profitable territories, efficient marketing channels
and improved localised procurement.
THG Nutrition witnessed one of its most challenging
periods in recent times and consequently I’m delighted
that we delivered revenue and market share growth across
many key territories, in addition to expanding our category
reach with new and innovative partners. Our customer
base has remained stable, notwithstanding a higher-pricing
environment and physical stores reopening, supporting the
defensive position of our brand.
Following the strategic investments made through
acquisitions during 2021, we have continued at pace
with our integration plans, prioritised customer retention,
revenue growth and cost efficiencies by reducing
previously-outsourced operations. The investments
made in nutrition innovation and production facilities
have allowed us to accelerate our speed to market,
as we continue to expand our range across categories
and markets.
Financial performance
Group revenue increased by 4.1% during the year across
core divisions (THG Beauty, THG Nutrition and THG
Ingenuity), including a contribution from acquisitions
within THG Beauty. A credible result considering the
major events that have impacted the global economy,
and compared to the prior year where the pandemic
continued to impact access to traditional retail channels
resulting in a tough comparable period.
The cost environment in 2022 has been unusual, with
high inflation across most cost lines and foreign exchange
headwinds applying pressure to margins. Whey costs were
unusually elevated which has compressed gross margins
in THG Nutrition as we have sought to protect customers
and invest in retention and growth for the longer term.
We have been encouraged by demand in a higher-pricing
environment, with strong repeat purchase rates from our
loyal customer base of above 80%.
This strategy has driven an improved service for
consumers in international territories. As we approach
completion of this fulfilment network investment, we are
well positioned in major territories to meet the growth
demands of our own-brands and our Ingenuity clients.
We continue to move towards increased automation in
our major hubs, driving distribution cost efficiencies for
the Group to help offset inflation.
Whilst we have reported a significant non-cash impairment
charge relating to Beauty and Ingenuity, this is a one-
off item relating to a combination of rising interest rates
leading to a higher discount rate, combined with other
macroeconomic pressures resulting in an impairment
of historic goodwill balances.
Core commodity prices used within our Nutrition division
have already seen significant deflation since their record
highs in 2022, giving us confidence in our ability to rebuild
divisional margins to previous levels. In addition, we have
taken measures to further improve profitability by exiting
certain loss-making categories which are discussed
in more detail in the CFO report.
Our strong liquidity position following the cash inflow in
the second half of the year, including the new £156 million
banking facility, means we are well positioned for further
operational and strategic progress, notwithstanding the
continued macroeconomic uncertainty.
6
Annual Report 2022
People and purpose
As THG evolves, we recognise that we must review our
purpose, vision, and values to ensure they align with our
strategy and reflect who we are, what we do, and why we
exist. Our purpose and vision reflect the diversity in our
business model and the impact we can drive through our
innovation and digital expertise. Based on our success
building THG Beauty and THG Nutrition into category leaders,
we remain committed to reinventing how brands connect to
consumers globally and supporting them to be best-in-class
at building, growing and accelerating brands.
In 2022, we submitted our emissions reduction targets to the
Science Based Targets initiative (SBTi) for validation - this is
an important step towards our goal to achieve net zero
by 2040. We also source 63% of the electricity used in our
operations from renewable sources and we are on track
to reach 100% by 2025. We have continued to make good
progress across the people and communities pillar of our
THG x Planet Earth Sustainability strategy and are proud that
we have 45% female and 26% ethnic minority representation
within our Graduate and Apprenticeship schemes, against a
target of achieving 50% and 20% respectively by 2025.
Our people are the heartbeat of THG, and I was exceptionally
pleased to reward some of our loyal and talented colleagues
with share awards during the year totalling c.£19m across 33.9
million shares, in addition to a number of promotions as we
continue to invest in and develop digital talent.
Finally, I’m particularly proud of THG’s contribution
to the communities in which we operated during 2022,
in terms of both taxes and charitable efforts. In the 18th
year since founding THG, the Group made a record global
tax contribution of £153.4m, up from £123.4m in 2021.
The contribution in 2022, from starting THG less than 18 years
earlier, shows the importance of start-ups to the UK economy.
Outlook
With the completion of the divisional reorganisation,
and decisive cost reduction action undertaken, the
Group enters 2023 with improving momentum to
achieve substantial margin expansion. Earnings recovery
is supported by continued operating leverage, reducing
consumer price protection, and the full-year effect of
operating efficiencies and cost savings arising from
the divisional reorganisation.
Our vertically integrated model enhances our ability to
react to periods of economic uncertainty, and the profit
improvement initiatives undertaken as part of the strategic
review give us added confidence in driving margin recovery
in 2023 and beyond.
We are well capitalised to advance our strategy of building
a strong, sustainable global platform supporting THG
brands and Ingenuity clients, and we have outlined
our core levers for driving margin accretion and positive
free cash flow over the near-term.
We remain confident that our business is underpinned
by strong investment and strategic growth plans which
will drive long-term value for our shareholders.
Our purpose
and vision
As THG evolves, we recognise that we must
review our purpose, vision, and values to ensure
that they align with our strategy and reflect who
we are, what we do, and why we exist.
Our purpose is to
make an impact through
digital transformation,
innovation, and expertise.
Making an impact is what we do; it’s why we
exist. We strive to make an impact for our
people, our customers, our Ingenuity clients,
our suppliers and partners, our shareholders,
and our communities.
We identified three things as enablers to our impact:
digital transformation, innovation, and expertise.
Through Ingenuity, digital transformation creates value
for our stakeholders as it improves efficiency, enhances
the customer experience, and increases agility. Our
innovative and entrepreneurial mindset allows us to
develop new products, enter new markets, and find
solutions to challenging problems.
Finally, we take pride in being experts in what we do
and use our expertise to make bold decisions and
deliver bigger and better outcomes for our stakeholders.
Our previous purpose – to reinvent how brands
connect digitally to consumers – remains true and is
encompassed in our new purpose; we reinvent how
brands connect digitally to consumers through digital
transformation, innovation, and expertise.
Our vision is to create
and grow category-leading
brands on a global scale.
Our simplified vision – to create and grow category-
leading brands on a global scale – encompasses
all areas of the Group and defines our ambitions
for the future.
7
8
Annual Report 2022 Our values
We’re incredibly proud to celebrate our diverse
workforce and the unique experiences, skills,
and qualities everyone brings to the table.
However, there are a few attributes that
we all share.
01/
Ambition
We think big
We set ourselves ambitious goals,
seeing opportunities where others see
obstacles. We take pride in our work and
view our setbacks as valuable learning
experiences. Our progressive mindset
allows us to deliver better outcomes for
our people, our brands, our clients, our
customers, and our communities.
02/
Innovation
We do things differently
We celebrate experimentation and champion
entrepreneurial thinking. We find solutions,
not problems, and use our creativity and
resilience to drive continuous improvement.
03/
Leadership
We lead by example
We inspire, motivate, and encourage each other
to push the boundaries of what is possible. We
set a positive example and promote a culture of
meritocracy so that everyone at THG, no matter
their background, age, or experience, has the
opportunity go further, faster.
04/
Collaboration
We work together
We share ideas, insights, and skills to
create a meaningful impact and drive
positive results for our business. We listen
to each other, we trust each other, and
we strive to create an environment where
everyone feels heard.
05/
Decisiveness
We make bold decisions
We use robust data to make quick, informed,
and confident decisions. We take calculated
risks and we’re not afraid to take accountability
for our actions.
9
THG colleagues captured at ICON Studios. Q1 2023
10
Annual Report 2022 Our strategy
Strategic Priorities
Our Stakeholders
We have built a strong, global business. Investments
made to date support further sustainable growth,
creating value across our key stakeholders.
Build category leadership
positions in beauty,
health and wellness
To make Ingenuity the
partner of choice for
commerce transformation
and sustainability solutions
Deliver engaging content
and innovative products to
our global customer base
Accelerate growth in core
international territories,
leveraging our local
infrastructure
Drive positive change
with our stakeholders,
through an entrepreneurial,
values-led culture
Medium-term Financial Priorities
Revenue
growth
Return to historical
adjusted EBITDA
margin of 9%+
Free cash flow
generation
Strong
balance sheet
Market-share
growth
Customers
and Consumers
We enable brands to have direct
relationships with consumers
by providing a high-quality retail
experience and establishing
a relationship of trust
Our Suppliers
and Partners
We promote open and
transparent working practices
and collaborate for mutual
commercial success
Shareholders
We create value for
shareholders and through
our purpose, vision, values
and strategy, deliver long-
term, sustainable growth
Our
Stakeholders
THG Ingenuity
Clients
We support clients
on their digital
transformation journeys
Our People
We aim to ensure THG is a
supportive environment with
career development opportunities
at all levels, focused on building
the skills of tomorrow
Society
& Communities
We aim to build skills and
develop talent to promote
greater social mobility, whilst
protecting the environments
we operate in and source from
11
For further information please see the following sections: THG Beauty, THG Nutrition, THG Ingenuity,
Chief Financial Officer Review, Section 172 Statement Stakeholder Engagement.
12
Annual Report 2022 Our business model
THG is a leading vertically integrated, global e-commerce technology group and brand owner,
powered by its proprietary technology platform, Ingenuity, through which it also provides
end-to-end e-commerce solutions for brands to reach a global e-commerce consumer base.
THG operates under three core divisions (THG Beauty, THG Nutrition and THG Ingenuity),
each operating in resilient, growing markets. These divisions leverage the Group’s specialisms:
the development of a portfolio of leading consumer brands; and the acceleration of D2C
growth for third-party clients. Following the simplification of the Group during the year,
each division is now operated in separate and distinct legal entities.
Divisional revenue
Territory revenue
Other
8%
Ingenuity
7%
RoW
17%
2022
Beauty
55%
USA
20%
2022
UK
43%
Nutrition
30%
Europe
20%
A powerful portfolio of
category-leading consumer brands
focusing on beauty and nutrition
Accelerating D2C brand growth
on a global scale via proprietary
e-commerce infrastructure
13
14
Annual Report 2022 THG operates under three core divisions: THG Beauty,
THG Nutrition and Wellness and THG Ingenuity.
The #1 online pure-play prestige beauty retailer
Lookfantastic, and several other popular online
prestige beauty retailers.
A portfolio of eight owned digital-first prestige
brands addressing primarily skincare, haircare
and cosmetics.
Proprietary complete e-commerce platform that powers
digital experience and retail for FMCG, beauty and retail
brands globally, creating a seamless experience for
consumers.
Clients can purchase end-to-end or modular services
to meet their needs, drawing on the Group’s digital
brand building capability, extensive proprietary
e-commerce technology and physical infrastructure.
15
Myprotein, the world’s #1 direct-to-consumer sports
nutrition brand and its brand family, offering products
across several associated categories, including protein
and sports nutrition, vegan alternatives, health snacks,
vitamins and athleisure.
Other divisions
THG Experience, three luxury event spaces: King Street
Townhouse Hotel, Great John Street Hotel, and Hale
Country Club & Spa, providing bespoke luxury spaces
for hosting influencer and brand events for both THG
and third-party brands.
THG Luxury, the online retail of over 200 fashion and
lifestyle brands, including the websites Coggles.com,
Mybag.com and Thehut.com.
From 1 January 2023, THG Experience and THG Luxury
will be reported within the THG Beauty division.
THG OnDemand, entertainment products and subscription
services for clothing, gadgets and vinyl, with a focus
on personalisation and licensing arrangements with
global publishing houses. THG OnDemand was under
strategic review at the year end. The strategic review is
now complete and the Board has subsequently decided
to discontinue the operations of this division. See more
information within the CFO report.
As well as being a third-party e-commerce solution, THG
Ingenuity is the operational infrastructure and digital hub
which supports THG Beauty and THG Nutrition, delivering
excellence throughout the supply chain and customer
experience. THG operates a vertically integrated model,
allowing the Group to control the entire customer journey,
from design, manufacturing, product education and
discovery, to purchase and fulfilment.
Its capabilities sit within three sub-divisions:
THG Technology
Since inception 18 years ago, the Group has continually
invested in building its own e-commerce software
specifically designed for the retail of consumer goods
globally. Solutions include the Group’s highly scalable
enterprise platform that powers e-commerce for brands;
hosting infrastructure ranging from dedicated servers and
cloud hosting to managed services; fulfilment technology
including warehouse and delivery management systems
and warehouse automation; and fraud management and
detection software.
THG Operations
Encompassing global fulfilment from a network of sixteen
warehouses in strategic locations across the world,
manufacturing of nutrition and beauty products in owned
and operated BRCAA/A grade facilities in the UK, US and
Poland, customer services and sustainability solutions from
carbon offsetting and consultancy to plastic recycling.
THG Digital
THG’s integrated marketing ecosystem brings together
digital marketing, media, creative content production,
translation and digital services to create a holistic,
data-driven digital marketing strategy across channels,
driving scalable and cost-effective customer acquisition.
G LO B A L F U L F I L M E N T
M A N U FA C T U R I N G
E C O
• Climate action
• Waste reduction
• Recycling
• ESG data & performance
• Re-forestation
S T U D I O S
S O C I E T Y
F LU E N T LY
OT H E R
• Strategic GTM consultancy
• Trading services
• Brand partnerships
• Performance marketing
C O R E C O M M E R C E
P L AT F O R M
C LO U D S E R V I C E S
V OYA G E R
• Warehouse
Management System
D E L I V E R E D
• Courier management
F I R / S T
• Fulfilment Inventory Retrieval
& Storage Technology
O R B I T
• Customer experience
16
Annual Report 2022
Core Operating Model
THG operates a vertically integrated model to deliver products and services to customers, giving greater control
over revenue growth and costs to deliver profits and cash in the medium-term.
Our marketplace
Revenue
THG Beauty and THG Nutrition sell products direct to consumers across
the world. Revenue is generated on the sale of products and recognised
when received by the customer.
THG Ingenuity generates revenue selling services to business customers
through a combination of one-off fees for services such as initial website
build, recurring fees for regular services such as marketing, fulfilment
or software licences, and revenue share on Ingenuity websites.
Costs
Input costs relate primarily to raw materials for goods manufactured in-house
(e.g. whey used in the manufacture of whey protein within the Nutrition division)
and finished goods purchased for resale (e.g. third-party beauty products
retailed by the Beauty division).
Distribution costs relate to the fulfilment and shipping of orders to customers.
THG has delivered efficiencies during the year through an innovative
warehouse automation solution, despite the inflationary cost environment.
Administrative costs relate primarily to marketing and people costs.
Adjusted
EBITDA
THG’s core divisions of Beauty, Nutrition and Ingenuity are profitable when
considering Adjusted EBITDA from continuing operations.
The Group’s medium-term Adjusted EBITDA target is 9%+ which is supported
by identified cost savings and in line with historical periods.
Cash
The Group is targeting to be broadly free cash flow neutral in 2023 and free
cash flow positive from 2024 onwards, with the strategy to reinvest for growth.
Market description
Our position
The competitive landscape within sports nutrition, our
primary market, is fragmented globally, comprising a very
small number of international brands of scale including
Myprotein, alongside a number of smaller brands that
operate principally in their local markets.
Myprotein is the largest online sports nutrition brand
globally,1 and the most internationally diverse. THG Nutrition
is therefore uniquely positioned to capitalise on this long-
term channel shift towards e-commerce.
In addition, we see THG Nutrition’s online direct to
consumer model as a strategic benefit as consumers
increasingly turn to the internet to educate themselves
on the benefits of nutritional products. THG Nutrition’s
connection with consumers through its websites and apps
enables direct engagement with consumers that traditional
retail brands cannot achieve, positioning THG Nutrition as
a valuable source of engaging and educational content for
consumers.
THG Nutrition is positively differentiated from competitors
through its digitally-native direct to consumer model, its global
reach, the extent of its vertically integrated model, and its
broader focus, spanning the sports nutrition, vegan products,
vitamins, bars and snacks and sportswear categories.
Outlook
The total addressable market is expected to continue
to grow, reaching approximately £25 billion by 2025,
representing a 11% CAGR (2021 and 2025). The online
segment of the sports nutrition market has historically
grown faster than the overall market; the drivers of this
structural growth include the increasing long-term trend
towards healthier lifestyles, an increased awareness of
nutrition, and greater online engagement of consumers,
both in terms of purchasing and educating themselves
on the category.
THG Nutrition’s total addressable market, including the
sports nutrition, vitamins, weight management products
and sportswear categories, is estimated to amount to £350
billion globally. THG Nutrition’s core focus is on the sports
nutrition market, which is estimated to amount to £17 billion,
however the focus has been expanded in recent years to
address wider segments of the global nutrition market.
Products
THG Nutrition’s products span a number of categories
of the global nutrition market, including protein powders,
supplements, vitamins & minerals, bars & snacks and
drinks. In addition, THG Nutrition offers performance
clothing through its activewear brand MP. THG Nutrition’s
products are primarily distributed direct to consumer
through its own websites, such as Myprotein.com.
This allows for close engagement with the brand’s
customers, while also enabling the brands to offer
a wider assortment of products than is typically available
through traditional retail channels, where the product
range is confined by shelf space.
Key trends
The global nutrition market’s growth is supported by the
long-term trend of consumers becoming increasingly health
conscious, and looking to consume more nutritional products.
This is common across a wide range of product categories.
The rate of adoption of healthier products is impacted
by income levels, with higher income countries typically
consuming more nutritional products. As lower income
countries develop, we would therefore expect to see higher
consumption of nutritional products, in line with the trends
seen in higher income countries.
The adoption of online channels has also been increasing in
the nutrition market, in line with that seen in many other retail
categories. In addition, e-commerce penetration is expected
to grow significantly in a number of key markets as the online
channel in these markets matures.
Consumers are not only turning to online channels for their
purchasing, but also using the internet to inform and educate
themselves of the benefits of nutritional products. Brands that
invest in producing engaging and educational content for their
consumers therefore stand to benefit through offering value to
consumers beyond the purchasing of products.
17
1. According to management estimates.
18
Annual Report 2022 Market description
Our position
The global total addressable market for beauty and
Personal care was £414 billion in 2022, which grew +8%
year-on-year. THG Beauty is focused on the premium
segment of the market, which was valued at £120 billion
in 2022 and grew +9% year-on-year.
Products
THG Beauty’s portfolio encompasses multiple categories
across the beauty and personal care market through its
online beauty retail destinations, vertically-integrated
prestige brands and subscription-based beauty boxes.
Supported by a network of global and local influencers, and
over 30 localised websites powered by THG Ingenuity, our
pure-play online retail destination sites provide a critical
route to market for over 1,300 brands across haircare, skin
and bodycare, cosmetics and fragrance.
THG Beauty Brands seek to capitalise on the trend of digital
channel shift across skincare, haircare and cosmetics using the
THG Ingenuity platform to scale, and THG Labs for full control
over new product development (NPD) and supply chain.
Key trends
The online global beauty and personal care market’s
growth is supported by increased accessibility to the
e-commerce space and improvements in the delivery
of the in-store customer experience online.
Premiumisation is a continuing trend within the global
beauty and personal care space with prestige beauty
growing c.5% per annum, faster than mass market
at c.3% per annum. This growth is being driven by long-
term, increasing demand for higher quality products,
as well as increasing wealth globally.
Online penetration in the beauty and personal care
market was 18% as of 20211, having increased from 8% in
2016. Whilst the pandemic boosted global e-commerce,
it has continued its upward trajectory, supported by
improvements in technology and global infrastructure.
Our diverse proposition across retail destination sites, THG-
owned beauty brands, subscription services and manufacturing
capabilities provides a complementary network of product and
service offerings, creating a competitive advantage through
strong brand partner relationships and an enhanced customer
experience. Operating globally provides wide exposure, not
only for THG Beauty, but also for brands who are able to
access multiple markets through one partner, supporting our
leading positions in the UK, US and Europe.
A broad range of 1,300 beauty brands across our sites allows
us to capture the opportunities that lie with the emergence of
fast growing, independent beauty brands and the long-term,
sustainable growth of established global players.
Consumers are increasingly looking for brands that align with
their personal values and allow them to express themselves,
often perceiving emerging brands as exciting and relevant.
THG Beauty is well positioned to support the growth of these
brands through unlimited shelf space, NPD capabilities and
unique insights into both consumer and customer trends.
These emerging brands, alongside the larger, more traditional
players, create an important layer of diversity in our portfolio that
enables us to adapt to customer needs and a dynamic trend
environment, whilst continually supporting the fundamental
demands of the wider beauty and personal care consumer.
Acting as a gateway into THG Beauty for our customers, our
beauty boxes represent global sampling opportunities for
a range of brands, with category leadership in UK and EU
markets. The use of monthly surveys enables us to gather vital
behavioural insights for THG and its brand partners to enhance
the customer purchase journey and support customer retention
across our sites.
Traditional brand discovery, such as department stores and
magazines, is becoming outdated and is currently in decline
with consumers increasingly turning to online platforms,
such as advice forums, online reviews and social media, for
information gathering and product discovery. Our leading
positions in online beauty retail and subscription services
allow THG Beauty to capitalise on this evolution.
Outlook
The global total addressable beauty and personal care market
is estimated to grow to c. £530 billion by 2026, at a CAGR of
6% between 2022–2026, with online adoption continuing to
grow, having risen to 18% in 2021 from 8% in 2016. Premium
beauty and personal care is expected to grow to £162 billion
by 2026, representing a CAGR of +8% between 2022-2026.
19
1. Source: Euromonitor.
Market description
The total addressable market for D2C across the three
core categories we operate within (Beauty, FMCG and
Retail) is $277 billion1.
Across our three solution areas of Technology Solutions,
Digital Solutions and Operations, we expect double digital
growth of 10% for fulfilment, 13% for Technology Solutions
and 16% for Digital Solutions by 20251.
Products
Technology Solutions comprises our core commerce
platform and the infrastructure required to run and maintain
the platform; hosting, security, data and analytics.
Digital Solutions comprises managed services that are
designed to build and grow brands in new markets, on a
global-local scale: trading & marketing services, creative
strategy, content production, translation & localisation,
and access to Society; our global Creator network.
Operations includes our fulfilment capabilities and courier
management, sustainability and our customer contact solution.
Key trends
Retail organisations are facing significant headwinds.
“Retailers and digital direct-to-consumer businesses
are strapped for staff, forced to move faster than ever,
and heavily reliant on technology. That reliance, coupled
with lightning-fast changes to consumer expectations,
drives them to seek constant technological innovation.”
(The Forrester Wave™: B2C Commerce Solutions, Q2 2022)
Commerce is moving beyond traditional channels to a
world of everywhere, any mindset commerce. Online and
offline are merging, social and advertising content are
fusing, and community commerce is thriving through social
networks and online marketplaces as well as physical
stores and retail hubs.
With 45% of online consumers prioritising convenience,
brands will make direct shopping experiences a priority,
building a commerce presence in every possible moment.
However, as 57% of B2C e-commerce sales flowed through
marketplaces in 2020, we expect brands to fight back and
regain their customers away from marketplaces, investing
in their own commerce stack to make every touchpoint
a shoppable moment.2
Our position
Ingenuity has high relevance and proven capabilities
to address these market shifts, delivering speed, scale
and channel expansion whilst minimising execution
risk for brands. We support our customers across
three main scenarios:
1. Replatforming and transformation of a customer’s
existing B2C digital commerce solution where the
customer is looking to accelerate digital brand
experience through improved platform functionality,
increased scalability of the platform solution whilst
reducing existing technical complexity and overall
technology costs.
2. Rapidly standing up a B2C digital commerce solution
to test brand and product propositions. Using our
out-of-the-box platform capability, we can quickly
execute a complete B2C digital commerce solution for
clients to have a site fully live and operational, at speed.
3. D2C internationalisation / new market entry supported
by our global digital commerce capabilities and
infrastructure (translation, product and content
localisation, local payments and local courier integration)
means launching into new markets with minimal cost,
risk and complexity.
Outlook
E-commerce sales are expected to reach $6.03 trillion
in 2023 with a CAGR of 11% by 2027, amounting to
$9.04 trillion.
The global market for digital commerce platforms is
estimated at $12.8 billion in 2022 and projected to reach
$38 billion by 2023, growing at a CAGR of 15% from
2022-2030.3
1. Sources: Accenture Grow Digital Commerce, Euromonitor passport, Marketsandmarkets.com, e-commerce platform market, 2022,
Globalnewswire, e-commerce fulfilment services, September 2022, Global web hosting market share, 2022, Globalnewswire, Global Content
Marketing Industry, 2021, represents global content market industry.
2. Sources: THG Ingenuity; The Top Consumer Trends Impacting DTC Today, October 2022, Forrester; Digital Commerce Predictions, 2022.
3. Source: statista, digital commerce worldwide, 2022, Digital Commerce Platform: Global Strategic Business report, 2023.
20
Annual Report 2022 THG Beauty operates leading pure-play online retailers
such as Lookfantastic, Cult Beauty and Dermstore,
providing a diverse offering of over 1,300 premium brands,
alongside a portfolio of prestige, THG-owned beauty
brands and subscription box services, with leading market
positions in core territories such as the UK, US and Europe.
THG Beauty’s proposition is complemented by in-house
product development and manufacturing in the UK and
USA through THG Labs, which develops and manufactures
products for THG-owned brands, in addition to third-party
beauty brands. It is the distinct positioning of each of our
retail sites that enable us to engage with specific segments
and address their associated needs.
Our ecosystem...
Online multi
brand retail
Subscription
boxes
Ecosystem
Production and
innovation
Owned prestige
brands
Accelerates value creation from data, and generates
superior consumer engagement
Makes us a trusted brand partner providing deeper
relationships and enhanced offering
Supports a highly engaged, digitally native
workforce equipped with best-in-class digital tools
Creates a source of global advantage for our retail
banners and drives consumer engagement
Is the enabler to value-accretive and advantaged
beauty brand acquisitions
World’s #1 online pure-
play retailer for prestige
beauty products with
wide range
First-to-market choice for
indie brands; advice lead
for the beauty enthusiast
US leading online
retail for professional
skincare brands
“
Broad appeal to typical
prestige beauty consumer
“
Younger, highly engaged
prestige beauty consumer;
“
Older, more affluent
consumers who are highly
(age, income, engagement)
on-trend matters
engaged in skincare
”
”
”
21
THG’s online multi-brand sites each have a unique
market position driving growth and category leadership,
not only through the delivery of prestige brands across
skincare, haircare, cosmetics and fragrance categories,
but also by retailing THG-owned brands and subscription
services alongside their direct-to-consumer sites and
third-party channels.
The integration between beauty retail destination sites,
THG-owned beauty brands and subscription services,
powered by THG Ingenuity, has allowed for a better focus
on customers’ needs through enhanced segmentation,
improved targeting and more engaging content delivery.
Active engagement and educational content have
enabled THG Beauty to reach a wider international
audience and drive a strong sense of brand loyalty.
THG Beauty’s fully integrated digital model continued
to be a key driver in the establishment and strengthening
of brand relationships throughout 2022, enhancing the
positioning of core categories such as skincare and
haircare with continuous new brand launches on THG’s
retail sites, ensuring that THG Beauty continues to
address the evolving needs of its customers and stays
at the forefront of the beauty market.
Operational Review
Key performance indicators, which include the impact
of the prior year acquisitions, have continued to improve
throughout the year, illustrating the resilience of the division,
given the challenges presented by the macroenvironment
in 2022. We maintained an active customer base of 9.2
million, demonstrating the effectiveness of our customer
engagement and retention strategy following enhanced
new customer acquisition throughout the COVID-19
pandemic. We continued to expand our beauty share
of wallet, reflected in higher average order values and
increased order numbers.
Revenue
Average order value1
FY22
FY21
FY20
FY19
£1,235.0m
FY22
£1,181.5m
FY21
£751.6m
FY20
£478.3m
FY19
Active customers2
Number of orders 3
FY22
FY21
FY20
FY19
9.2m
9.2m
6.9m
4.1m
FY22
FY21
FY20
FY19
1. Average Order Value is defined as the average order value per customer order on a gross revenue basis, inclusive of any shipping revenue.
2. Active customers is defined as customers who have purchased at least once within the period.
3. Number of orders is defined as orders fulfilled within the period.
£63
£60
£55
£51
17.5m
17.1m
13.1m
8.3m
22
Annual Report 2022 Strategic Highlights
Engagement and Retention
Existing customers drive over 75% of revenue within THG
Beauty and engagement and retention strategies are vital
in enriching their customer experience and deepening the
relationships that drive repeat purchase behaviour and
enable category leadership.
LF Premier, introduced in February 2022, allows customers
to pay a one-off fee for a 12-month recurring subscription
plan offering unlimited free delivery on most delivery
options – creating a new subscription model for the site,
with LF Premier customers representing over 12% of orders
in December 2022. Both spend per account and average
order frequency have increased over 130% when compared
to non-premier customers in 2022.
A further example of Lookfantastic’s investment in
engagement and retention is the October 2022 launch
of loyalty programme ‘LF Beauty Plus+’. Customers are
rewarded with points for engagement on site, such as
purchases and reviews, exclusive access to promotional
events and enhancements to personalised marketing
communications through an improved customer profile.
Since the launch, over 900,000 members have driven
positive changes across transactional key performance
indicators such as spend per account, order frequency
and units ordered.
In addition to the KPI improvement, our loyalty
programme has driven customer engagement and is
continually refining our level of customer insight and
understanding, aiding in the continual improvement
of value creation for our brand partners.
Territory Expansion
As well as continuing growth in our core territories, we have
seen growth in new markets following investment in the Group’s
global distribution network. This has allowed us to identify
growing market opportunities through the localisation of our
proposition in the MENA (Middle East and North Africa) region.
Using our ability to fulfil within the region and utilising our
experience from market entry into parts of Europe, we have
accelerated our brand awareness in the fast-growing region
for premium beauty, resulting in double digit growth across
MENA in 2022.
The UK, our largest market, also delivered a robust
performance in 2022, against an uncertain economic
backdrop and the normalising of customer spending
behaviour following the pandemic.
Fragrance Category Expansion
In 2022, fragrance continued to demonstrate its resurgence.
The fragrance market is estimated to have grown 9% year-
on-year, outperforming the global beauty and personal care
market which grew 8% between 2021 – 2022.
Growth in online penetration of the fragrance market has
echoed that of the beauty and personal care market, rising
from 7% in 2016 to 17% in 2021.
Expansion into this growing category allows us to fulfil more of
our customers’ needs, as well as deepening our relationships
with brand partners. Despite its sensory nature, customers are
increasingly making fragrance purchases online, and we will
continue to support the category’s evolution through initiatives
such as the Lookfantastic scent edit, which was launched
using our subscription boxes to access our highly engaged
beauty customers and introduce innovative ways of shopping
the fragrance category online.
T H G S U B S C R I P T I O N B O X E S
THG Beauty’s subscription boxes have been an
important component in supporting THG x Planet
Earth in 2022. Lookfantastic Beauty Box introduced
an initiative to reduce excess packaging in the
thousands of beauty boxes sent out monthly
to our subscribers. To protect the climate and
nature, delivery has been reduced to contain one
reformatted outer corrugate box, and booklets
featuring information and articles on the month’s
edition have been digitalised. This change in
packaging will result in a 70% decrease in carbon
footprint when compared to previous packaging,
and the 100% recyclable boxes has resulted in a
61% reduction in material end-of-life waste. This has
enabled us to improve customer experience as well
as source the reduced packaging more locally.
THG Brands
Positioned at the top end of the 5-star market,
with a portfolio of over 500 spas across 55 countries,
ESPA have continued to lead the wellness space by
creating deeply sensorial and personalised wellness
experiences with leading partners, as well as in the
sanctuary of the home through its expertly crafted
products and treatments.
In 2022, ESPA’s Design and Consultancy service
delivered their bespoke wellness concepts to two
of the world’s most luxurious spas and resorts.
Overseeing everything from concept to build
development and interior design, two state-of-the-
art spas were brought to life in the form of ESPA Life
Waldorf Astoria in Lusail, Doha and the Ritz-Carlton
New York, NoMad.
The pioneering concept in Qatar is the new flagship
for the Middle East and represents the future of
wellness, whilst at the same time reflecting the
unique character of Doha, having taken inspiration
from the luxury world of yachting in its elegant spa
with a 180-degree view of the bay and Lusail skyline.
Offering holistic wellbeing in the heart of New York,
the spa at the Ritz-Carlton New York, NoMad creates
meaningful wellness journeys centred around the
mind, body and skin, with treatments incorporating
mindfulness modalities and techniques that allow
guests to unwind from life in the city.
P E R R I C O N E V I TA M I N C E S T E R C C C + F E R U L I C B R I G H T E N I N G
U N D E R - E Y E C R E A M
Winner of Allure Beauty Expert Best of Beauty 2022
Best Brightening Eye Cream, this breakthrough
product designed and manufactured by THG
Labs illustrates the effectiveness of our in-house
development and manufacturing capabilities.
Ophthalmology-tested, its unique concept dramatically
reduces under-eye discolouration and addresses
concerns such as dullness, uneven texture and dark
circles, with 89% of women reporting firmer-looking
skin and 87% seeing brighter, more radiant skin
and an improvement in the appearance of fine
lines and wrinkles.1
23
1. Source: The Benchmarking Company, 2022.
24
Annual Report 2022
Fantastic Futures
Launched in July 2022, Fantastic Futures is an initiative
dedicated to supporting niche start-ups by boosting online
exposure to their business. After pitching to Fantastic Futures’
experts, the successful brand then gains access to the global
retail platform alongside THG’s suite of brand solutions,
including THG Ingenuity’s direct to consumer technology,
content and marketing, and digital strategy capabilities in
order to grow, support and strengthen their brand, and THG
Beauty’s product manufacturing capabilities.
Aligning with THG x Planet Earth, the debut brand on
the Fantastic Futures platform was Fiils, a beauty brand
at the forefront of the refillable beauty space since 2020,
championing sustainable beauty products and encouraging
more conscious consumerism. Fiils aims to overhaul
bathrooms of single use plastic and minimise waste while
offering a luxe range of refillable, everyday essentials that are
made with the best ethical, natural and organic ingredients.
Since its on-site launch in July 2022, orders including Fiils
products have reached over 500, demonstrating the impact
of Lookfantastic as an incubator for smaller brands by driving
engagement, as well as continuing to strengthen its own
position by bringing relevant new brands to consumers.
P R O V E N A N C E X C U LT B E A U T Y
In response to shoppers’ demands for more transparency
when shopping for beauty online, Cult Beauty began
using Provenance to embed sustainability badges on-site,
introduce impact-focused search filters and curate best-
selling edits such as the Cult Conscious beauty box.
Protecting long-term value relies on clearly communicating
social and environmental impact information to shoppers,
and in doing so, Cult Beauty aims to grow the market for
truly sustainable brands and help establish benchmarks for
new brands joining the retailer.
Provenance is a software solution that provides accessible
and trusted information about a product’s origin and its
impact on people and the planet, empowering shoppers
to drive progress through their purchasing power as
well as encouraging brands to surface the proof of their
sustainability impact claims.
By connecting participating brands with conscious
shoppers and improving their product page conversion,
Cult Beauty is not only empowering customers to
shop in line with their personal values, but powerfully
rewarding brands for their transparency and
sustainability commitments.
Cult Beauty X Provenance has proven successful in
driving key performance indicators such as increased
order numbers and higher purchase rates across more
than 110 brands using the software.
Future Outlook
Alongside building upon leading positions in core territories,
THG Beauty will utilise its global customer base to focus on
driving profitable and sustainable growth in territories where
we have medium-market positions and localised infrastructure.
We will continue to invest in engagement and retention
strategies by focusing on our understanding of the customer
and developing deeper insight to evolve our targeting and
personalisation strategy across our retail destination sites.
We will continue to leverage brand relationships to be the
first-to-market with products, supported by THG Labs driving
product innovation and newness for our brands. As we maintain
category leadership in haircare and skincare, there will also be
a focus on the development of our fragrance and cosmetics
categories through leading brand and product assortment,
engaging content and best-in-class customer experiences.
25
Our diverse proposition, including our end-to-end platform,
global footprint and multi-branded retail offerings will allow us
to leverage our competitive advantage to become the digital
partner of choice for the world’s biggest beauty brands and the
leading digital destination for beauty consumers.
THG Nutrition comprises a collection of sports nutrition and
wellness brands, that includes the Myprotein brand family.
by 7 manufacturing facilities), and its broader focus, spanning
the sports nutrition, vegan products, vitamins, bars and
snacks and sportswear categories.
The brand is currently the category leader (online and
offline) in the UK and Western Europe, with 2022 market
shares of approximately 18% and approximately 14%
respectively, according to Euromonitor data. In addition,
based on the rapid sales growth THG Nutrition has delivered
in Asia historically, we believe there is a significant growth
opportunity in Asia, where the sports nutrition category is
currently underpenetrated and there is rapidly increasing
adopting of digital channels. Our market share in the US also
remains low relative to other territories, with this representing
a significant expansion opportunity in future years.
Myprotein has increased its market share of the sports
nutrition category over recent years,2 with significant
headroom for further growth, particularly given the structural
market tailwinds supporting our growth, such as consumers
becoming increasingly health conscious and increasing online
penetration within the category. We therefore remain highly
confident in our ability to continue to grow market share in
existing markets and further expand into new markets.
Our leading nutrition and wellness brands empower our
consumers to live healthier lives and deliver on their personal
nutritional goals. Our brands are delivered to our consumers
through a network of localised direct to consumer websites,
enabling consumers from all over the world to experience the
nutritional benefits of our products. We continue to invest in
localising our brands, technology and operations to bring our
products to an increasingly global customer base.
Our brands are also aspirational brands, with the growth of
our activewear range, which now accounts for 8% of total
brand sales. This is further evidenced by the increasingly
premium focus of our Myvitamins brand, which now targets
the “beauty-from-within” category within the beauty market,
through a range of products, such as retinol, collagen and
hyaluronic acid.
Our commitment to product quality is demonstrated
through the investments we have made in best-in-class
product innovation and production facilities in the UK, US
and Poland, ensuring our products remain at the forefront
of innovation, and our manufactured to the highest quality
standards. This is complemented by investment in more
sustainable product and packaging forms as part of
THG x Planet Earth.
E-commerce is the winning channel within sports nutrition,
accounting for 35% of global sports nutrition sales in
2021. In addition, e-commerce penetration is expected
to grow significantly in a number of key markets as the
online channel in these markets matures. Myprotein is the
largest online sports nutrition brand globally,1 and the most
internationally diverse. THG Nutrition is therefore uniquely
positioned to capitalise on this long-term channel shift
towards e-commerce.
Myprotein is positively differentiated from competitors
through its digitally-native direct to consumer model, its
global reach (75% of the brand’s 2022 sales were outside the
UK), the extent of its vertically integrated model (supported
1. According to management estimates.
2. Source: Euromonitor
26
Annual Report 2022 Operational Performance
Revenue
2022
2021
2020
2019
Average order value1
£675.1m
£659.5m
£562.3m
£412.9m
FY22
FY21
FY20
FY19
Active customers2
Number of orders3
FY22
FY21
FY20
FY19
7m
7.2m
6.3m
4.3m
FY22
FY21
FY20
FY19
1. Average Order Value is defined as the average order value per customer order on a gross revenue basis, inclusive of any shipping revenue.
2. Active customers is defined as customers who have purchased at least once within the period.
3. Number of orders is defined as orders fulfilled within the period.
£50
£46
£47
£48
13.2m
13.9m
12.3m
8.7m
In 2022, THG Nutrition revenue grew 2.4% YoY to £675m,
with this growth principally driven by the performance of
Myprotein, the largest online sports nutrition brand globally,
alongside continued growth in manufacturing revenues.
Our broad customer base is evidenced by our community
of over 8 million social media followers, with our multi brand
approach enabling us to capture a much greater share of
each consumer’s health and wellness spend, while also
encouraging cross category purchases. Regular consumer
engagement and educational content have enabled the
Group to reach an increasingly wider international audience.
THG Nutrition finished the year with 7 million Active
Customers globally, reflecting the strong brand loyalty of
existing customers and the successful acquisition of new
customers across a number of strategic markets.
Strategic highlights
Territory expansion
THG Nutrition’s growth in 2022 was driven by growth
across the Myprotein brand family, alongside growth of our
manufacturing revenues. In the UK market, we remain the
#1 brand in the market1, and continue to grow sales through
bringing the brand to a broader range of customers, new
product development, and partnerships, such as the recently
announced Iceland partnership.
Myprotein takes a fully localised approach to brand
development, operating over 60 localised websites
supported by localised content, product catalogues, trading,
marketing, influencers, payment options, fulfilment and
customer service. This approach has proven to be highly
effective and has facilitated rapid international growth, with
Myprotein holding leading market shares in the UK and
Western Europe, while rapidly scaling its presence in Asia
and North America, which represent significant opportunities
for further market share expansion.
We continue to invest in localising our proposition, with
a notable example being the investment made in local
operations in Australia in 2021, which helped drive
a rapid acceleration of our sales in Australia in 2022.
These investments included a new warehouse in
Melbourne, powered by THG’s proprietary WMS,
Voyager. The move has led to delivery times reducing
from 10 days to 3 days, and postage costs decreasing
by -75%. Since the move, Myprotein has acquired and
retained more customers (+47% new customers vs 2020),
and observed an uplift in orders (+81% orders vs 2020)
and site conversion (+45% increase in site conversion
vs 2020). The localised operations are also complemented
by the use of local influencers and affiliates to help build
brand equity in the region, establishing a footprint for future
brand partnerships and localised new product development.
Category expansion
Since we acquired Myprotein in 2011, we have taken it from
a small UK-focused brand with a limited number of product
lines, to become a leading online global nutrition and lifestyle
brand with over £600 million revenue.
In 2023, we will deliver the next major evolution of our
brand family, with the launch of a new holistic wellbeing
brand addressing the vegan, natural and organic nutrition
categories. The brand will build on the success of Myvegan,
which is our current flagship brand in this category, while
expanding its reach to the adjacent categories of organic and
natural nutrition. As with our other Nutrition brands, the new
brand will sit within the Myprotein brand family, leveraging
the brand equity and awareness of the master Myprotein
brand, while creating cross-selling opportunities across the
various brands when customers shop through the Myprotein
website. This approach enables us to catch a much greater
share of a customer's total nutrition purchases than if we
were to just sell a narrow product range, while also enabling
us to bring a wider range of customers into our ecosystem.
New product development
Our vertically integrated business model enables us to be at
the forefront of innovation and new product development,
informed by millions of data insights from our global markets.
We research, develop and manufacture ourselves, and
Myprotein is renowned for being first to market with new
products and formats, such as with our Clear Whey protein
variants and with Multivitamin gummies. The capabilities
we now have in-house continue to support incremental sales
growth opportunities across a broad range of categories,
enabling more consumption occasions, while enabling us
to accelerate speed to market and launch new products
more quickly in response to changing market conditions.
A notable highlight in 2022 has been the development
of new ranges of innovative bars through Brighter Foods
(acquired in 2021), a leading product developer and
manufacturer of sports nutrition bars and healthy snacking
products. This included the development of our new Impact
Bar, our improved Layered Bars, and our first-to-market
Breakfast Layered bars.
The launch of Whey Forward in the US market is an
example of our ability to launch first-to-market products
within the sports nutrition category. This animal-free
performance protein caters for a broader range of dietary
requirements, whilst not compromising on taste and
performance. With Perfect Day, the creator of the world’s
first animal-free dairy protein, we have developed a formula
which is identical in composition to the whey protein found
in cow’s milk. Whilst core whey products remain a growth
category, sustainable alternatives with lower exposure to
commodity prices are a key development area, and we
are excited to follow our US launch with a recent launch
into the Asia market.
Functions managed in-house by
Internal and
external market
research
Concept
ideation
Formulation,
feasibility and
commercial review
Internal and
external customer
panelling
Production
trial
Influencer
and social
trends
Product
launch
27
1. Source: Euromonitor.
28
Annual Report 2022
P A R T N E R S H I P S
We have built Myprotein into a category-leading
brand in the 10 years since its acquisition.
The unrivalled brand equity we have developed
is now being brought to new product formats
and retail channels through a range of partnerships.
These new partnership help move THG Nutrition
towards its strategic ambition of becoming
a lifestyle brand group that addresses a broad
range of consumers.
A notable expansion is our partnership with Hotel
Chocolat, where we have co-developed a range
of premium protein bars. These bars have proven
highly successful with our customers since they
were launched in November 2021, and are now
a top 5 best-selling bar range within THG Nutrition.
We have also recently launched strategic global &
localised partnerships with Mike & Ike in the United
States, Vimto in the United Kingdom, and Jelly Belly
globally, which bring these household brands into
the nutrition space for the first time. In 2023, we will
launch a further partnership with Perfetti Van Melle
under its Chupa Chups brand, a global leading
confectionary brand.
These new partnerships offer our brands opportunities
to extend into new categories, sales channels, increase
brand touchpoints and engage consumers in new
ways, while extending their purchasing of the brands
to new purchasing occasions.
Retail
THG Nutrition brands are pursuing selective expansion into
retail channels, principally in the UK, Japan and USA.
In the UK, Myprotein holds prominent listings in Asda,
Tesco, Iceland and Co-Op. Our protein bars, snacks and
drinks are also now stocked in PureGym, the largest gym
chain in the UK, with expansion across further gym groups
a strategic priority for 2023. In Japan, Myprotein products
are sold across the Don Quijoite, Costco, and Family Mart
retail chains, with further distribution opportunities being
explored across a range of international territories. In the
USA, Myprotein recently launched on The Vitamin Shoppe,
one of the leading specialty nutrition retailers in the USA, as
we continue to scale the reach of the Myprotein brand in the
USA market, which is a key strategic focus going forward.
M Y P R O T E I N X I C E L A N D
In 2022, Myprotein signed a five-year partnership
deal with Iceland Foods to launch a range of frozen
ready meals. The ready meals launched in 1000+
Iceland stores and online in January 2023. The new
range is jointly developed by Myprotein and Iceland
and will provide healthier and more nutritionally
complete versions of many popular meals, and
will include fully prepared meals, pizzas, wraps,
ingredients, desserts and ice creams.
Iceland, the second largest frozen food retailer
by market penetration, was selected as a partner
given its reputation for the highest product quality,
with 96% UK coverage, and its award-winning
track record as a licensing partner. Myprotein’s
licensing strategy further builds non-digital channel
brand awareness and product range expansion,
complementing its UK and global store-based
distribution network through retailers such as the
Co-operative Group in UK and Don Quijote in Japan.
The partnership underlines the strength of the
Myprotein brand, the largest online nutrition brand
globally, and the potential to further expand the
brand across strategic partnerships in future periods.
Customer
The THG Nutrition customer base is highly engaged, with
over 80% of revenue coming from repeat customers.
In addition, in recent years an increasing share of revenue
has been driven through channels that incur no or very low
marketing costs. A key driver of this has been the launch of
our mobile apps in 2021; mobile apps have contributed an
increasing share of revenue and now account for 15%
of THG Nutrition online revenue.
Influencers remain at the heart of our customer engagement
strategy, and the regular and highly engaging content they
produce is a significant asset to our THG Nutrition brands. The
content they produce is regularly fed into our own marketing
channels, providing authenticity that complements our own
marketing content. Given consumers are increasingly turning
to online channels to educate and inspire themselves around
nutrition and fitness, influencers play an increasingly important
role in engaging with and educating our customer base.
An example of our successful investment in content is our in-
house The Supplement magazine, which is provided for free to
our online customers. Since its launch in 2021, The Supplement
has proven highly popular with our customers, and is now one
of the highest circulation magazines in the UK, with our most
recent issue reaching a digital circulation of over 500,000.
To further expand the reach and engagement of The
Supplement, we are developing a new range of “recipe”
magazines in 2023.
Our broad customer base is evidenced by our community
of over 8 million social media followers, with our multi brand
approach enabling us to capture a much greater share of each
consumer’s health and wellness spend and encouraging cross
category purchases. We continue to develop highly engaging
and educational content to ensure high levels of customer
satisfaction and brand awareness. The results of this can be
seen through market research that shows Myprotein ranks
either #1 or #2 in aided brand awareness in 8 key markets, with
significant increases in aided awareness seen in the territories
such as the UAE and Australia.
We continue to explore new ways of reaching our customers,
with our expansion onto Tiktok, where we now have more
than 0.5m followers and host regular shopping events, being
a notable example, and which demonstrates the relevance of
our brand to new consumers. While we look to leverage new
retail and marketing channels to grow our brand awareness
and market share, our direct channels, such as our website,
app and magazine, create a hub for our community that allows
direct engagement with our customers, which is key to building
long-term brand equity and customer loyalty. We continue to
invest in strengthening our direct channels and see this as a
key source of competitive advantage for our brands.
Future outlook
We will continue to evolve the Myprotein brand through
building out and launching new sub-brands where
opportunities exist for further category expansion.
Within our existing categories, we are focused on delivering
innovative and highly targeted new product development
through our in-house capabilities with a focus on more
sustainable ingredients and materials. By continually evolving
our portfolio of products and brands to better suit consumers
needs, we capitalise on new opportunities and expand our
addressable markets.
Our nutrition brands are accessible to a wide range of
customers, not just the regular gym goer. We intend to further
broaden the appeal of Myprotein through a rebrand in the
second half of 2023 that will further strengthen our identity
as a brand that resonates with a wider audience and
subsequent consumption occasions.
In addition, continued expansion into traditional retail channels
through our convenience ranges will enable us to reach
new customers, and drive incremental consumption, while
continuing to raise brand awareness. Licensing partnerships
leverage the power of the Group’s brand portfolio and digital
first business model. It offers our brands opportunities to
extend into new categories, increase brand touchpoints and
engage consumers in new ways.
We are able to leverage our D2C capabilities to elevate
partnerships to new levels, further driving visibility and
brand equity.
29
30
Annual Report 2022 C L I E N T C A S E S T U D Y
Matalan
Through 2022, THG Ingenuity delivered a large-scale digital
transformation project for Matalan – replatforming Matalan’s
existing e-commerce store and building true omnichannel
capabilities for one of the UK’s leading value retailers. The
project, launched in March 2023, will enable Matalan to
fulfil online orders from its stores as well as ‘endless aisle’
functionality (the ability to display store stock availability,
online.) Through our solution, Matalan is also utilising THG
Ingenuity’s Order Management System, which is replacing
its legacy system, and integrating our customer service
software, THG Orbit, into its customer service centres.
As well as enhancing the customer experience on site
and in stores, THG Ingenuity’s app platform will ensure
Matalan maximises engagement opportunities from its
always-on customer approach. In addition, the integration
of the Matalan Me Loyalty Programme into the Ingenuity
platform will allow Matalan’s popular loyalty programme to
be truly omnichannel – a first for Matalan. THG Ingenuity
will integrate with Mirakl, to offer Dropship & Marketplace
capability, significantly increasing the product range
available for Matalan customers.
And finally, to ensure the delivery of a truly world-class
digital experience, Matalan is leveraging THG Studios to
develop and deliver all on-site fashion product photography
from July 2023.
2022 saw an evolution in Ingenuity’s growth strategy as we
progressively pivoted away from small business customers
to deliver transformative e-commerce solutions for larger
organisations across our three focus categories of beauty,
FMCG and retail.
This transition has been made possible through the
development of Ingenuity’s headless solution (the decoupling
or ‘detaching’ of the user experience (front-end) layer of the
website from the back-end functionality of the platform) and
modular platform capabilities. This offers greater choice and
flexibility to larger-sized customers looking to upgrade all, or
some, of their existing e-commerce technology stack, as well as
offering customers the ability to design more bespoke, branded
user experiences by managing the front-end of the website
themselves. As we increasingly support these larger customers
in the e-commerce technology decision-making process, THG
Ingenuity has found itself naturally playing a more significant
role right at the heart of these customers’ transformation
agendas, frequently broadening the project scope across all
elements of digital business change.
With this shift towards larger, more strategic customers comes
another evolution in the form of our commercial model as we
place greater focus on generating recurring revenues through
platform license fees and full-service contracts where the
customer adopts our suite of service offerings across our three
core solutions: technology, operations and digital.
Expanding the customer base
In 2022, we confirmed new customer partnerships with
brands across our core categories of beauty, FMCG and
retail including Philip Morris International, Kraft Heinz and
Anastasia Beverly Hills. We see customers commissioning
an increasing number of services across our unified product
offering including D2C website design and build, international
site rollout, translation, creative and content production,
performance marketing and strategy.
As the number of brands live on the platform increased
through 2022, we saw the positive impact of recurring
revenue and uptick in GMV from these live sites.
C L I E N T C A S E S T U D Y
Coca-Cola Europacific Partners
Since launching on the Ingenuity platform in November
2020, Coca-Cola Europacific Partners (CCEP) has
continued to experience strong performance across
key metrics. Conversion rate increased 1.15 percentage
points, average order value increased 17.4% and revenue
increased by 92.2% year on year. This, in large part, has
been achieved through the continuous collaborative
testing and optimisation of trading strategies by the client
and THG Ingenuity’s e-commerce team.
31
32
Annual Report 2022
Platform evolution
Through 2022, we continued to invest extensively in our
platform, with one of our most significant evolutions being
the release of our headless solution.
Coggles, THG’s own-brand luxury online fashion store
offering aspirational third-party brands access to an
international customer base, was the first site to be
relaunched on Ingenuity using a new headless solution.
The front-end flexibility offered by the headless solution
enabled greater customisation and tooling options for rich
feature creation without the need for development changes.
The relaunch resulted in higher traffic, average session
duration and conversion and, in turn, greater revenue
for the brand.
This shift in our platform strategy offers our customers
new and greater flexibility, while extending the reach of
our addressable market to a larger network of enterprise
customers, alliances, and partner agencies – those looking
for a more flexible solution to build a custom, front-end
whilst benefiting from THG Ingenuity’s extensive back-end
capabilities and applications. Mondelēz International was
THG Ingenuity’s first customer to launch a D2C website
utilising this headless solution, working with a third-party
agency to design the front-end brand experience for
Mondelēz International’s Toblerone website and integrating
this into THG Ingenuity’s commerce capabilities.
In addition, the modularisation of the THG Ingenuity platform
has enabled a new type of customer to consume THG’s
breadth of microservices, all of which can be integrated
into a customer’s existing or future technology-stack,
independently. This opens up further opportunities for THG
Ingenuity to be selected as the e-commerce provider by
larger-sized customers who are looking to upgrade certain
elements of their existing e-commerce ecosystem without
the need of a full replatform, saving the customer cost, time
and reducing complexity.
Web Shopper Facing - Front End
Behind The Scenes - Back End
Attractive & Easy
Navigation
Inspiring
Engagement
Frictionless
Checkout
Secured Order
Processing
Fast & Reliable
Delivery
Helpful Customer
Assistance
Data-driven
Insights
Resilient
Architecture
Secure &
Performant
ELYSIUM
THG/APP
THG/PERSONIF Y
THG/CHECKOUT
THG/DETECT
THG/DELIVERED
THG/VOYAGER
THG/MMS
THG/OMNI
THG/ORBIT
THG/IQ
Web Commerce
Mobile Commerce Customer & Loyalty
Payments, Tax
& Duties
Fraud
Couriers &
Tracking
WH Fulfilment
Marketplace Order
Fulfilment
Store Order &
Fulfilment
Customer Services
Data, Analytics
& M/L
THG/CLOUD
SERVICES
Cloud
• Mobile, Web & App
• Special Offer Engine
• AI Recommendations
• Wishlist
• Product Reviews
• Shoppable Blog
• Returns
• Referrals
• Subscriptions
• Headless
• Powerful CMS
• Order Management System
• Product Information Management
• Marketplace
• Email Marketing
• Optimised Basket
• ISO Certified
• Carrier Management
• Warehouse
• Range Curation
• Click & Collect
• Multi-Channel Incl.
• Real-Time Data
• Global Infrastructure
• Segmentation
• Conversion
• AI Powered
• End To End Tracking
• Campaign
Management
• 50+ Payment Options
• Global Payment
• Human Interactions
For High-Risk Orders
• Customer Loyalty
Offering
• 400+ Rules
• Next Day Delivery
• Over 200 Courier
Services
Programmes
• Local Alternatives
• Class Leading Detection
• Audience Management
Across Channels &
Media
• Tax & Duty
Calculation
• Optimised Workflows
To Retain & Grow
Customer Base
Management System
• D2C Fulfilment &
Returns Handling
• Multiple
Pack Types
• MHE
• Attribute
Management
• Inventory Publish
• Order Processing
• Amazon Connector
• Pick From Store
• Ship From Store
• Instore Ordering
• Returns To Store
• Omnichannel
Transaction Support
• Share Stock Online
Live Chat, Whatsapp
& Social
• Machine Learning
Powered Response
Tools
• Returns
• Telephone Ordering
• AI & ML Capabilities
• Secure Global Coverage
• One Business
Data View
• High Performance
• Managed Hosting
• SKU-Level Analytics
• Customer Feedback
• Automation
& Control
• Active-Active Sites
• Global Operation Centre
33
34
Annual Report 2022 Product evolution
As part of our product evolution, we’ve simplified the go-to-
market proposition of our complete e-commerce platform
and service capabilities into three core solutions: Technology
which encompasses the core commerce platform, data,
hosting and security; Digital, which encompasses the
peripheral brand-building capabilities of creative and
campaign, marketing and data, strategy, translation and
influencers, and finally; Operations, neatly bringing together
the three core offerings needed to build a digital business:
e-commerce technology, brand experience and fulfilment.
Within this, we continue to further evolve the offering of
individual propositions, with particular spotlight on:
Data Analytics (THG IQ): The IQ data proposition has
traditionally supported our THG customer base across
a number of facets including consumer insights, analytics
and reporting. More recently, the team has expanded to
support customers across a number of additional areas
in line with the increasing necessity for data driven and
programmatic digital strategies. To this effect, we have
developed a more comprehensive audience insight,
segmentation and technology function as well as broader
consultative and data services to support customers
generating a better understanding of consumers and
consumer behaviour. This has included more recent
partnerships with platforms such as Liveramp and
Qubit and further opportunities across the Customer
Data and Machine Learning space being considered.
Strategy: Our experienced strategy team has
developed go-to-market propositions for some
of THG Ingenuity’s largest customers, consulting
on ‘where to play and how to win’ strategies in the
e-commerce ecosystem and creating a point of
differentiation to deliver profitability in the space. In
2022, we evolved our strategy offering with our ‘D2C
playbook’ proposition which brings together insight-
driven and experience-based recommendations
to provide customers with a step-by-step guide for
successful e-commerce execution.
Fulfilment: We continue to build a best-in-class complete
e-commerce fulfilment solution powered by THG’s
proprietary technology, with AutoStore automation at its core.
Bringing together Voyager, THG’s Warehouse Management
System (WMS) and Warehouse Control System (WCS),
THG Delivered’s courier integrations and THG Orbit’s
omnichannel customer support solution with AutoStore’s
proprietary automation hardware and software, THG FIR/
ST’s frictionless fulfilment environment is disrupting the
market and bringing a highly efficient end-to-end fulfilment
solution to customers of all sizes.
Partnership evolution
Throughout 2022, we continued to integrate select, strategic
partners such as Liveramp, Bynder and ContentSquare onto
the platform, increasing platform extensibility for Ingenuity
customers looking for best-in-class solutions to data
enablement, asset management, testing and optimisation
and social integration. These partners, whilst providing
additional revenue streams, offer choice for Ingenuity
customers looking to utilise our complete e-commerce
platform whilst retaining elements of flexibility.
The evolution of the Ingenuity platform into a headless
and modularised solution has opened new opportunities
for partnerships with technology consultancies, systems
integrators and development agencies looking to work with
a proven, API-first, cloud-based e-commerce platform for
their own customers’ solutions. THG Ingenuity’s alliance
programme identifies like-minded partners to go to market
with, selling together to enter new markets and acquire new
customers. In December 2022, THG Ingenuity announced
its first partnership with UK-based technology consultancy;
AND Digital.
C A S E S T U D Y
Brand evolution
In 2022, we renewed our investment in marketing
with a heightened focus on building awareness for
the THG Ingenuity brand in our focus markets of
the UK and Europe, the USA, Australia, India and
the Middle East. Content has been a key driver of
this approach, and in October we launched our first
consumer trends whitepaper: “The Future Consumer
Trends Impacting D2C Business.” This coincided with
our inaugural Future of Commerce Event.
Day one’s agenda at The Future of Commerce Event
commenced with the launch of our whitepaper.
Following this, headline speakers Meta, Microsoft
and TikTok shared their thoughts on how commerce
businesses can meet the heightened needs of
today’s consumers. In addition, THG Ingenuity’s
own customers, Homebase and Nestlé, shared their
thoughts on what D2C means for the future of their
organisation. Day two’s agenda focused on the key
capabilities required to accelerate change through
digital commerce. In a fireside chat, our keynote
speaker, Diary of a CEO’s Steven Bartlett, shared his
advice on leadership capabilities. Ending two fantastic
days of talks, the event culminated with a panel
discussion bringing together THG’s own perspectives
on the future of commerce.
With over 100 attendees, the event enabled guests to
come together, network and share their challenges
and ambitions for their own future of commerce.
Future outlook
Over the next three years, THG Ingenuity will transform into a multi-category and multi-channel D2C provider with
a global footprint:
FROM...
TO...
Business focused on domestic UK market
Truly global leader with increasing
revenues coming from outside UK
Beauty specialist & emerging retail and FMCG player
Strong player in beauty, retail & FMCG
D2C exclusivist
Multichannel digital commerce provider generating
revenues from non D2C channels & services
Limited selectiveness of customer size
Targeting medium, large and enterprise clients
Internal capacity building
Extensive partnership ecosystem
Resource-intensive managed services model
High-value added digital services
35
36
Annual Report 2022 Chief Financial
Officer review
"We have taken decisive action over the last year, to reduce the
Group cost base, provide strategic optionality and a stronger
platform for growth in the context of a tough trading comparative
period and a challenging macroeconomic backdrop."
Damian Sanders
Executive Director and Chief Financial Officer
Year ended 31 December 2022
Year ended 31 December 2021
Before
Adjusted Items
Adjusted
Items
Total
Before
Adjusted Items
Adjusted
Items
Total
£’000
£’000
£’000
£’000
£’000
£’000
Consolidated income statement
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative costs
Operating loss
2,239,229
-
2,239,229
2,179,910
(1,333,737)
(25,517)
(1,359,254)
(1,225,506)
905,492
(380,652)
(25,517)
(22,117)
879,975
(402,769)
(674,626)
(298,145)
(972,771)
(149,786)
(345,779)
(495,565)
954,404
(386,928)
(575,711)
(8,235)
-
-
-
(43,012)
(86,216)
(129,228)
2,179,910
(1,225,506)
954,404
(429,940)
(661,927)
(137,463)
Alternative performance measures
The following table provides adjusted measures. The Group believes that these alternative performance measures, which
are not considered to be a substitute for IFRS measures, provide stakeholders with additional helpful information on the
performance of the business. These alternative performance measures are consistent with how the business performance
is monitored and reported through internal management reporting to the Board.
The below table summarises the result from operations before depreciation, amortisation, share-based payments and SaaS
change in accounting policy costs. These amounts are also reconciled back to the nearest IFRS measure within this table:
Year ended 31 December 2022
Year ended 31 December 2021
Adjusted gross profit
Adjusted distribution costs
Adjusted administrative costs
Adjusted EBITDA
SaaS change in accounting policy
Adjusted EBITDA pre SaaS change in accounting policy
EBITDA losses from discontinued categories
Adjusted EBITDA (continuing)
37
£'000
925,488
(353,412)
(507,962)
64,114
10,183
74,297
14,582
88,879
£'000
974,767
(369,120)
(444,371)
161,276
-
161,276
8,348
169,624
Note: The table on the previous page shows financial results for gross profit, distribution costs and administrative costs before the impact of depreciation,
amortisation and share-based payments. The impact is as follows:
• For statutory presentation gross profit includes charges of £20.0m (2021: £20.4m) for amortisation and depreciation.
• For statutory presentation distribution costs include charges of £27.2m (2021: £17.8m) for amortisation and depreciation.
• For statutory presentation administrative costs include charges of £155.9m (2021: £131.3m) for amortisation and depreciation
and £10.7m (2021: £nil) for share-based payments.
Reconciliation from Adjusted EBITDA to Operating loss
Year ended 31 December 2022
Year ended 31 December 2021
Adjusted EBITDA
Depreciation
Amortisation
Share-based payments
Operating loss before adjusted items
Adjusted items – impairment
Adjusted items – other
Operating loss
£'000
64,114
(94,191)
(108,975)
(10,734)
(149,786)
(275,422)
(70,357)
(495,565)
£'000
161,276
(70,478)
(99,033)
-
(8,235)
(55,990)
(73,238)
(137,463)
Revenue
Gross profit
Group revenues grew by 2.7% to £2,239m (2021: £2,180m).
THG Beauty sales grew +4.5% to £1,235m (2021: £1,182m),
THG Nutrition grew +2.4% to £675m (2021: £660m) and
THG Ingenuity delivered +9.1% growth in external revenue
to £160m (2021: £146m). The contribution from acquisitions
– predominantly in the Beauty division - was in line with
expectations at c.£125m. Organic performance was pleasing
relative to peers and against tough comparatives as the world
re-opened, with stable customer metrics.
International sales accounted for 57% (2021: 58%) of total
Group revenue. The US continues to be a strong growth area
for the Group delivering c10% revenue growth in the year with
sales of £447m (2021: £406m) representing 20% of the Group,
following on from the successful integrations of US acquisitions
in recent years including Dermstore, Bentley Laboratories and
Perricone MD. THG Nutrition continues to perform well in the
US albeit from a moderate base, with the UK delivering sales
growth in excess of the Group, reinforcing our strong position
and continued ability to increase sales demonstrably in our
more mature markets.
Revenue growth was driven by a higher pricing environment,
particularly in THG Nutrition, but was offset by challenges in
respect of the reopening of physical retail, pressures on the
consumer environment driven by the emerging cost of living crisis,
along with disruption to the UK courier network in the final quarter
of the year, the latter being more acute in THG Beauty.
Note that during 2022, revenue generated from the
discontinued categories totalled £119m (2021: £147m).
More information on these categories is included later in the
report. Excluding these areas, the revenues from the continuing
operations delivered growth of +4.3% year on year.
Adjusted gross profit was £925m (2021: £975m) equating to
a gross profit margin of 41.3%, 340bps adverse year on year.
Gross profit on a statutory basis decreased to £880m from
£954m with a margin of 39.3% (2021: 43.8%). One key
driver of the reduction on a statutory basis is the £26m
inventory provision and costs of decommissioning facilities
recognised in 2022, both of which are adjusting items given
their one-off nature. At the year end, certain loss-making
categories and territories primarily within THG OnDemand
were placed under strategic review. This review is now
complete and these operations will be fully exited by the
end of Q3 2023. This has led to this provision relating to the
expected discounting and disposal of inventory following
the exit of unprofitable websites and warehouses.
The cost environment in 2022 has been unusual, with
elevated whey commodity prices and other raw materials
experiencing high inflation, notably labour and energy,
across most major cost lines which has applied pressure
to margins. Measured price increases were implemented
to mitigate a proportion of the impact of this temporarily
elevated input cost, however the Group also invested in
consumer price protection, particularly in Nutrition,
which has reduced margins during the year.
These margin headwinds began to abate across the
second half of the year, a trend which we have seen
continue into early 2023.
38
Annual Report 2022 Operating expenses
Distribution costs on a statutory basis reduced as a
percentage of sales by 170bps compared to 2021, culminating
in a cost of £403m (2021: £430m), which is 18.0% (2021: 19.7%)
of revenue. Included within statutory distribution costs are
£22m of costs relating to incremental delivery fees in respect
of Covid-19 and commissioning of new facilities. In 2021, these
costs totalled £43m. The substantial decrease is due to lower
incremental Covid-19 costs this year following the impacts of
the pandemic lessening on the supply chain and a reduction
in costs for new site commissioning as the Group network
expansion programme draws to a conclusion, generating
substantial capacity for growth. Adjusted distribution costs of
£353m (2021: £369m) were 15.8% (2021: 16.9%) of revenue.
This improvement was driven by the Group’s continued
focus on network optimisation, and the expanded usage of
warehouse automation utilised to combat high levels of labour
inflation in the market.
Administrative costs on a statutory basis totalled £973m
(2021: £662m) with the increase driven by three key factors.
The first being a non-cash impairment charge in respect of
THG Beauty of £183m (2021: £nil) and THG Ingenuity of £87m
(2021: £nil). A result of the divisional reorganisation is that
additional cash-generating-units were identified during 2022
which has led to the impairment reviews being completed at
a significantly more granular level than in prior periods. This
combined with more challenging global markets where the
market price of many technology businesses has fallen over
the last 18 months, macroeconomic, inflationary and interest
rate pressures along with the substantial amount of assets
included within THG Beauty from recent acquisitions, and
THG Ingenuity following the continued investment in the
global infrastructure and platform has led to the impairment
of historical goodwill balances. Secondly, a £10m charge (2021:
£nil) for software-as-a-service has been recognised within
administrative costs in 2022 compared to being capitalised
within intangible assets in 2021, following the change in
accounting policy during the prior year. Finally, in 2022
a share-based payment charge of £11m was also incurred
following the new employee incentive schemes launched
in the year which were £nil in the prior year.
Adjusted administrative costs as a percentage of revenue,
increased by 230bps year on year, driven by well-documented
global inflationary increases, primarily in respect of marketing
costs driven by significant paid media and cost per click
inflation. This impact was partially offset by the Group’s
technology-focused marketing approach and influencer
model, alongside the execution of an extensive cost-reduction
program across the second half of the year. The Group’s cost-
reduction programme delivered a reduction in headcount
of almost 2,000 heads through technology investment, and
simplification of operations within its core divisions across
THG Beauty, THG Nutrition and THG Ingenuity. The full impact
of this will continue to flow through into 2023 as it annualises.
Adjusted EBITDA and Adjusted EBITDA (continuing)
£'000
Adjusted EBITDA
Margin
SaaS change in accounting policy
Adjusted EBITDA pre SaaS change in accounting policy
EBITDA loss from discontinued categories
Adjusted EBITDA (continuing)
Margin
2022
64,114
2.9%
10,183
74,297
14,582
88,879
4.2%
2021
161,276
7.4%
-
161,276
8,348
169,623
8.3%
Adjusted EBITDA fell to £64m with a margin of 2.9% (2021: £161m, margin of 7.4%) with adjusted EBITDA from continuing
operations totalling £89m compared to £170m in 2021.
Adjusted EBITDA (continuing) represents a margin of 4.2% (2021: 8.3%) reflective of the challenging environment that we
have seen in 2022 and the Group’s strategy to, as far as possible, protect consumers from these inflationary pressures in
addition to adverse foreign exchange, together with administrative cost inflation across payroll and marketing.
SaaS change in accounting policy
Following the IFRIC agenda decision in 2021, the Group
updated its accounting treatment and policy for IAS 38
Intangible Assets accordingly. The impact of this was that
costs in relation to SaaS solutions have been recognised
within administrative costs during the year. Comparative
costs were recognised within intangible assets and
amortised in line with the previous accounting policy.
An alternative performance measure (APM) has been
presented this year to provide a like-for-like comparison
reflective of the prospective treatment. This APM will
not be repeated in future years.
Discontinued categories
During the year, and as previously announced, a strategic
review was undertaken in the year to review our non-core
operations. As a result, the Group proactively chose to
discontinue certain loss-making territories and categories.
A new APM has been presented this year to provide
information as a result of this decision. The categories that
have been discontinued – notably THG OnDemand and
ProBikeKit - contributed revenue of £119m (2021: £147m)
and an EBITDA loss of £15m (2021: £8m). The strategic
review is now complete with these operations expected
to be fully exited by the end of Q3 2023.
Depreciation and amortisation
Total depreciation and amortisation costs were £94m and
£109m respectively (2021: £70m and £99m), an increase of
19.9% on the prior year. Depreciation increased as a result
of the previous investment made in the global warehouse
expansion program which is almost complete, with the
automated beauty fulfilment facility at Manchester Airport
(Icon 2) finalising its commissioning phase in early 2023.
Amortisation increased primarily due to the full year impact
of the charge in respect of intangibles recognised on
acquisitions during 2021, plus the continued investment
in our proprietary technology platform during the period
which totalled £60.7m (2021: £47.6m). This investment
is focused on the technology to support both internal
and external customers and ensures that we continually
enhance the functionality and capability of the platform.
Operating loss
Operating loss before adjusted items totals £150m
(2021: £8m). This loss was a result of the challenging
macroeconomic environment (principally cost inflation
and commodity prices) and our focus on price protection
to customers. These costs are expected to be partially
transitionary in nature and are showing promising signs
of abating as we move into 2023. Furthermore, the Group
has responded with a number of pricing and cost initiatives
during the year to ensure the cost base is appropriately
rebalanced and these will continue to annualise into 2023.
The Group incurred an operating loss in the period of
£496m (2021: £137m). This is primarily driven by the
increase in costs as set out above which have compressed
gross margins, along with one-off costs incurred during the
year. These costs relate mainly to the non-cash impairment
charge and costs related to the discontinuation of loss-
making categories.
Non-cash impairment totals £275m. This was driven
by the factors set out in the adjusted items section
later in this report and in more detail within note 11.
The impairment relates to charges in respect of THG
Beauty and THG Ingenuity totalling £269m, other
intangibles within discontinued categories of £4m
and assets held for sale totalling £2m.
Costs incurred in respect of the discontinuation of loss-
making categories are a result of inventory provisions in
respect of discounting and clearance along with disposal
of impacted inventory, costs of warehouse exits and other
non-recoverable assets. These costs total £32m.
Finance costs net of finance income
Finance costs net of finance income have increased to
£54m (2021: £49m) driven principally by higher lease
charges as the new facilities from the warehouse expansion
programme contain a full year charge in 2022, vs. part year
in 2021 and the additional £156m debt facility drawn in Q4.
Loss before tax and tax rate
Reported loss before tax was £550m (2021: £186m).
The effective tax rate is 1.8% (2021: 25.9%), based on
a total tax credit of £9.8m (2021: £48.2m). The effective
tax rate differs from the average statutory rate of 19.0%.
This is primarily due to a movement in deferred tax
not recognised (-7.8%), and the impact of goodwill
impairment (-9.3%).
At the balance sheet date the total net deferred tax liability
is £77m (2021: £74m). The deferred tax liability in respect
of intangible assets recognised on consolidation was
£151m (2021: £152m). The deferred tax asset in respect
of tax losses recognised was £55m (2021: £60m). There
were £58m of unrecognised deferred tax assets in respect
of tax losses at the balance sheet date (2021: £nil). This
non-recognition has an impact on the income statement
tax credit, and this is one of the primary reasons for the
effective tax rate being below the statutory rate.
Earnings per share
Loss per share was (£0.44) per share (2021: (£0.13) per
share). The non-cash impairment charge has a material
impact here and if this were to be removed, the loss per
share would have been (£0.21) per share.
39
40
Annual Report 2022
Segmental Summary
Following the completion of the divisional reorganisation during the year, the Group reports 31 December 2022 results on a
divisional basis. This is a change in the current year and the prior year has also been restated to show a comparative on a
like-for-like basis of preparation.
Following the restructure, revenue is now recharged for the services that THG Ingenuity provides to the wider Group in the
form of platform fees, customer services, fraud detection services, THG Studios, fulfilment, postage and marketing services.
These items are eliminated on consolidation and shown separately in the following tables.
Overview
2022
£m
THG
Beauty
THG
Nutrition
THG
Ingenuity
Other
Central
Inter-group
elimination
Continuing
Total 1
Discontinued
categories
FY 2022
Total
External revenue
1,235.0
675.1
159.6
50.9
Inter-segment
revenue
-
-
597.4
-
Total revenue
1,235.0
675.1
757.0
50.9
-
-
-
-
2,120.6
118.7
2,239.2
(597.4)
-
-
(597.4)
2,120.6
118.7
2,239.2
Adjusted EBITDA
pre SaaS costs
Adjusted EBITDA
Adjusted EBITDA
margin
32.9
32.9
51.8
51.8
29.3
19.1
(1.9)
(23.2)
(1.9)
(23.2)
2.7%
7.7%
2.5%
-3.7%
-
-
-
-
88.9
78.7
3.7%
(14.6)
(14.6)
74.3
64.1
-12.3%
2.9%
1. At the year end, certain loss-making categories and territories within non-core divisions were placed under strategic review and subsequently management
has decided to exit these areas. The exit doesn’t meet the criteria under IFRS 5: Discontinued operations as these categories and territories are not a major
component of the Group as defined by the accounting standard, however, to provide further information on the ongoing revenue and Adjusted EBITDA of
the Group the result of these operations has been shown separately in the above table.
2021
£m
THG
Beauty
THG
Nutrition
THG
Ingenuity
Other
Central
Inter-group
elimination
Continuing
Total 2
Discontinued
categories
FY 2021
Total
External revenue
1,181.5
659.5
146.3
Inter-segment
revenue 3
-
-
602.5
Total revenue
1,181.5
659.5
748.8
46.1
-
46.1
-
-
-
-
2,033.4
146.5
2,179.9
(602.5)
-
-
-
Adjusted EBITDA
70.2
76.6
40.4
(2.1)
(15.5)
Adjusted EBITDA
margin
5.9%
11.6%
5.4%
-4.6%
-
-
-
169.6
8.3%
(8.3)
-5.7%
161.3
7.4%
2. For the loss-making categories and territories within non-core divisions that have been shown separately within the 2022 table under the discontinued
categories heading, the same adjustment has been included for the 2021 result to show a comparative of continuing operations year on year.
3. Internal revenue was not recharged until the completion of the divisional reorganisation, however for illustrative purposes this has been shown above for
2021. This has been calculated using the same charging mechanisms in 2022 to provide a like-for-like comparison.
£m
Revenue
Adjusted EBITDA
Margin %
2022
1,235.0
32.9
2.7%
2021
1,181.5
70.2
5.9%
Change %
+4.5%
-53.2%
-330bps
THG Beauty sales grew +4.5% year on year to £1,235m despite tough covid comparatives in 2021, due to online retail
benefitting in H1 2021, from the closure of physical retail stores. The division successfully integrated Dermstore, Cult Beauty
and Bentley Laboratories into THG Beauty in the year, which supported growth across our two key territories, the UK and
the US, with the acquisitions delivering in line with expectations.
THG Beauty delivered Adjusted EBITDA of £33m (2021: £70m) with a margin of 2.7% (2021: 5.9%), being a 330bps reduction
on 2021. The reduction in margin is an effect of inflation, the consumer environment deteriorating driven by the emerging
41
cost of living crisis and in Q4 material disruption in the UK courier network impacting seasonal gifting and consumers
propensity to spend online.
Three key acquisitions being Cult Beauty, Dermstore and Bentley, were integrated in the year, with synergies beginning to be
realised in the second half of 2022. Average order values continue to increase totalling £63 per basket for 2022 (2021: £60),
this is driven from a focus on customer loyalty (with the launch of LF Beauty+) and continued investment to drive increased
customer engagement in both third-party and THG own-brands and growth of market share in our key territories.
£m
Revenue
Adjusted EBITDA
Margin
2022
675.1
51.8
7.7%
2021
659.5
76.6
11.6%
Change %
+2.4%
-32.4%
-390bps
THG Nutrition sales grew 2.4% year on year to £675m, with foreign exchange providing headwinds, alongside a particularly
strong comparative period from the increase in online retail due to the closure of physical retail stores. Within THG Nutrition,
the input cost environment was one of the most challenging we have ever faced. In the context of this exceptionally
challenging environment, we are encouraged by the robustness of trading to deliver revenue growth in 2022.
THG Nutrition delivered an Adjusted EBITDA of £52m (2021: £77m) with a margin of 7.7% (2021: 11.6%), being a 390bps
reduction year on year and considerably below medium-term norms for this division reflecting exceptional input prices.
Measured price increases were successfully implemented during 2022, which has partially mitigated increases in whey input
prices, freight costs and foreign exchange rate movements, although we continued to support customers through these record
high-cost pressures which temporarily suppressed the margin. When commodity prices normalise, which we are already
experiencing in 2023, we expect a return to the historical EBITDA margin within THG Nutrition over the medium-term.
£m
External revenue
Internal revenue
Total revenue
Margin %
Adjusted EBITDA
Margin %
2022
159.6
597.4
757.0
29.3
3.9%
19.1
2.5%
2021
146.3
602.5 1
748.9
40.4
5.4%
40.4
5.4%
Change %
+9.1%
-0.9%
+1.1%
-27.5%
-150bps
-52.7%
-290bps
1. Internal revenue was not recharged until the completion of the divisional reorganisation, however for illustrative purposes this has been shown above for
2021. This has been calculated using the same charging mechanisms in 2022 to provide a like-for-like comparison.
THG Ingenuity revenue from external customers increased by 9.1% to £160m, with a strategic re-positioning in Q3 2022, focusing
on higher value and higher margin clients which provide improved quality recurring revenue. Total Adjusted EBITDA was £19m
after a £10m charge for the SaaS accounting policy change as explained earlier.
THG Ingenuity delivered an Adjusted EBITDA margin of 2.5% (2021: 5.4%), being a 290bps reduction year on year. Following the
decision to reposition the division, there was a strategic exit of smaller accounts to implement the new strategy which will continue
throughout 2023. As revenue scales and the revenue mix evolves towards the commerce offering we consider margins will return
to and exceed those achieved historically.
Ingenuity Commerce revenue of £47m (2021: £45m) includes Software-as-a-Service licence fees, monthly brand building fees,
infrastructure service fees, revenue share, translation and creative services, with most of this being recurring in nature, albeit
complemented by non-recurring fees. FY22 revenue growth was suppressed while management execute the change in strategy,
with smaller contracts paused, and the new customer base on a longer lead time from tender to live site.
Following the announcement of the divisional reorganisation during 2022, THG Ingenuity began to charge for its services to
internal customers across the wider THG PLC Group. This generated revenue of £597m, relating to services provided which have
previously not been recharged across the group due to the historical corporate structure in place. The revenue relates to platform
fees, customer services, fraud detection services, THG Studios, fulfilment, postage and marketing services. This revenue
is eliminated on consolidation.
42
(602.5)
2,033.4
146.5
2,179.9
Adjusted EBITDA pre SaaS change in accounting policy
Annual Report 2022 Other
£m
Revenue
Adjusted EBITDA
Margin %
2022
50.9
(1.9)
-3.7%
2021
46.1
(2.1)
-4.6%
Change %
+10.5%
+11.3%
+90bps
Other includes THG Luxury and THG Experience. Revenue growth of 10.5% has been achieved as a result of the reopening of
THG Experience venues in 2022, following lockdowns in 2021 driven by the worldwide pandemic, alongside the strong growth
achieved within THG Luxury.
Adjusted EBITDA loss of £2m remained consistent with the prior year with margin pressure driven by macroeconomic pressures
seen in other trading divisions.
Central costs
£m
EBITDA loss from central PLC costs
2022
(23.2)
2021
(15.5)
Change %
+49.3%
Central costs relate primarily to the PLC Board remuneration, professional services fees, group finance, M&A, risk
(insurance) and governance costs that are not recharged to the divisions as they principally relate to the operations of
the PLC holding company. The increase in FY22 was driven by an increased cost base as a result of the macroeconomic
environment, increased investment in governance, and investment in sustainability initiatives.
Discontinued categories
£m
Revenue discontinued
Adjusted EBITDA from discontinued operations
Margin %
2022
118.7
(14.6)
-12.3%
20211
146.5
(8.3)
-5.7%
Change %
-19.0%
+74.7%
-660bps
1. For the loss-making categories and territories within non-core divisions shown separately within the 2022 table under the discontinued categories heading,
the same adjustment has been included for the 2021 result to show a comparative of continued operations year on year.
At the year end, certain loss-making categories and territories primarily within THG OnDemand were placed under
strategic review and the Group has subsequently decided to exit these areas enabling management to focus attention
on a simplified and streamlined group. The exit doesn’t meet the criteria under IFRS 5: Discontinued operations,
as these categories and territories are not a major component of the Group as defined by the accounting standard.
However, to provide further information on the ongoing revenue and Adjusted EBITDA of the Group, these have been
shown separately. The discontinued categories contributed £118.7m of revenue and an Adjusted EBITDA loss of £14.6m
in 2022. Management are reviewing the optimal route for exit of these categories with the process expected to be
complete by the end of Q3 2023.
Inter-group elimination
Intergroup eliminations relate to revenue recharged for the services that THG Ingenuity provides to the wider Group in the
form of platform fees, customer services, fraud detection services, THG Studios, fulfilment, postage and marketing services.
These are eliminated on consolidation.
Adjusted Items
Within Cost of sales
Inventory provision for discontinuation of loss-making categories
and decommissioning of facilities following strategic review
Within Distribution costs
Transportation, delivery and fulfilment costs in relation to Covid-19
Commissioning – new facilities
Within Administrative costs
Other costs following the outcome of strategic review
Restructuring costs to simplify the group structure
Acquisitions – legal and professional costs
Acquisitions – restructuring and integration
Impairment of goodwill
Impairment of certain intangible and tangible assets associated
with Software-as-a-service arrangements
Impairment of assets for discontinuation of loss-making categories
Impairment of assets – macroeconomic impact on valuation
Impairment of assets held for sale
Other legal and professional costs
Donations
Within Finance costs
Softbank option – non-cash
Total adjusted items before tax
Tax impact
Total adjusted items
2022
£’000
25,517
25,517
18,504
3,613
22,117
6,942
6,803
-
8,046
-
-
3,763
269,828
1,831
569
362
298,145
(601)
345,178
(53,949)
291,229
2021
£’000
-
-
26,628
16,384
43,012
-
10,233
12,225
5,328
53,008
2,982
-
-
-
1,350
1,090
86,216
601
129,829
(11,901)
117,928
For full details on each category of adjusted item see note 4 to the financial statements.
In order to understand the underlying performance of the
Group, certain costs included within cost of sales, distribution,
administrative and finance costs have been classified as
adjusted items. These items principally relate to acquisition-
related restructuring and integration costs, transportation,
delivery and fulfilment cost increases in relation to Covid-19.
All material classes of adjusted items reduced year-on-year.
Following the divisional reorganisation of the Group in the year,
the Group has undertaken a strategic review of loss-making
categories and territories. At the year end, certain loss-making
categories and territories primarily within THG OnDemand
were placed under strategic review. This review is now complete
and these operations will be fully exited by the end of Q3
2023. This has led to a one-off non-cash inventory provision
of £26m recognised within cost of sales. This one-off provision
relates to discounting and clearance along with the disposal of
impacted inventory within these non-core divisions and disposal
of inventory following the decision to decommission some
unprofitable warehouse operations within Asia.
Other costs following the outcome of the strategic review
totalling £7m are included within administrative costs. These
costs include the impact of triggering early lease break clauses
for the unprofitable warehouse operations within Asia and
marketing costs for pre-releases that will no longer be launched.
The full exit of the discontinued areas is expected to be
complete by the end of Q3 2023 with costs not recurring
after this date.
Additional restructuring charges of £7m were incurred, these
being the costs of executing the divisional reorganisation,
principally relating to professional fees.
Following the decision to discontinue certain categories
and territories, an impairment has been charged totalling
£4m against affected assets.
A further impact of the divisional reorganisation is that the
assets and cash flows of each division are now separately
identifiable. The result being the identification of additional
cash-generating-units (‘CGUs’), which are reflective of the
new corporate structure. The result of more CGUs is that
the impairment review has been undertaken at a more
granular level than in previous years. Following the significant
acquisitions within the THG Beauty division in recent years,
a substantial amount of intangible assets are included within
the underlying asset base whilst the market price of comparable
43
44
Annual Report 2022 assets, alongside many technology businesses, has fallen over
the last 18 months. This is reflective of more challenging global
markets following the macroeconomic, inflationary and interest
rate pressures driven by, amongst other things, the Russia-
Ukraine conflict. Against this backdrop, the impairment review
has led to an impairment of £183m within the Beauty division.
In addition, an impairment charge of £87m has been recognised
within the THG Ingenuity cash-generating-unit. This has arisen
as the impairment review has been undertaken at a more
granular level than in previous years. Following the appointment
of our new CEO of THG Ingenuity in 2022, the Group has
repositioned its strategy. Management believe they have made
conservative growth assumptions which are lower than the
growth rate prospects of the sectors in which THG Ingenuity
operates given the recent change in strategy. Alongside this,
THG Ingenuity has made significant investment for the future
in its platform and global infrastructure network. These factors,
combined with the challenging macroeconomic environment
impacting several of the key assumptions, particularly the
discount rate, which have also had a bearing on peer valuations,
has led to the impairment of the historical goodwill within this
cash-generating-unit.
During the year, there has been a cost incurred in respect
of transportation, delivery and fulfilment costs in relation
to Covid-19. The ongoing incremental excess cost across
accounting periods is driven by the continued lockdowns
experienced in Asia which still affect air traffic and key shipping
lanes. As the effects of the pandemic lessen and the lockdowns
in Asia ease, the service providers will no longer need to charge
these incremental costs.
In addition, restructuring and dual-running integration costs of
£8m were also incurred in relation to the 2021 acquisitions as
they were embedding into the Group infrastructure. These costs
are expected to decrease in 2023.
Cashflow
EBITDA
Working capital movements
Tax paid
Adjusted items
Net cash generated in operating activities
Acquisition of subsidiaries net of cash acquired
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from issuance of ordinary shares net of fees
Proceeds from bank borrowings
Other
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
2022
£’000
64,114
2021
£’000
161,276
23,528
(65,322)
(4,857)
(7,095)
(45,071)
(65,528)
37,714
23,331
(5,691)
(769,890)
(94,854)
(111,553)
(81,564)
(77,620)
(73)
760,230
156,000
-
(74,576)
(61,252)
(63,044)
(236,754)
536,827
773,581
473,783
536,827
In 2021, there was a one-off £760m cash inflow from share
issuance. This did not recur in 2022.
a substantial cost inflationary period, and further working
capital improvements are expected.
As part of investing and growing the infrastructure of the
Group and the distribution network, there has also been
investment in property, plant and equipment and intangible
assets (primarily the Ingenuity platform) totalling a cash
outflow of £176m (2021: £189m). This is lower than initially
guided as the group rationalised spend in year.
The expanded global distribution infrastructure and
automation is delivering operating efficiencies during
In October 2022, the Group signed an incremental £156m
banking facility, provided by existing lenders, for a three
year term, illustrating their continued support for the group.
This provided additional cash inflows in 2022.
The Group ended the year with cash and cash equivalents
of £474m (2021: £537m).
Balance sheet
Cash and cash equivalents and net cash before lease liabilities.
Loans and other borrowings
Lease liabilities
Cash and cash equivalents
Sub-total
Adjustments:
Retranslate debt balance at swap rate where
hedged by foreign exchange derivatives
Net debt
Net (debt)/cash before leases liabilities
2022
£'000
2021
£'000
(679,189)
(489,865)
(334,376)
473,783
(539,782)
(349,173)
536,827
(302,211)
24,782
(2,548)
(515,000)
(180,624)
(304,759)
44,414
The Group’s balance sheet remains robust closing the
period with cash balances of £474m (2021: £537m). The
€600m Term Loan B matures in December 2026 and the
incremental £156m facility matures in Q4 2025. The Group's
revolving credit facility of £170m remains undrawn and has
not been drawn post IPO.
Net debt before lease liabilities and adjusted for the impact
of hedging was £181m (2021 net cash: £44m). The increase
in net debt year on year is driven by the investment in
property, plant and equipment, leases and intangible assets
in the period totalling £176m.
Capital expenditure
Property, plant and equipment totalled £360m (2021:
£336m) which increased to £1,276m (2021: £1,506m) when
including intangible assets. The movement in the year
was driven by additional investment in the THG Ingenuity
platform and continued investment in the Group’s global
warehouse expansion programme which is now nearing
completion. These were offset by the depreciation,
amortisation and impairment charges incurred.
The total cash outflow for the year was £63m (2021: £237m).
There was an inflow from working capital movements
totalling £24m (2021: outflow £65m) primarily driven by
a focused reduction in inventory. This reduction followed
a prolonged period of investment over recent years, to
manage uncertainty around Brexit and subsequently
Covid-19, on top of an increased inventory footprint required
to expand our global warehouse supply chain which can
now be rationalised as the expansion program
is approaching completion.
Cash paid on adjusting items totalled £45m (2021: £66m)
driven by a reduction in transportation, delivery and
fulfilment costs in relation to Covid-19. This has decreased
as the effects of global lockdowns have lessened during
2022, alongside the successful integration of 2021
acquisitions, allowing synergies to begin to be realised
which will annualise into 2023.
In 2021, there was a cash outflow of £770m for acquisition
of subsidiaries. This has reduced to £6m in 2022, solely
related to the settlement of contingent consideration
due on the acquisitions completed in 2021.
Damian Sanders
Chief Financial Officer
17 April 2023
45
46
Annual Report 2022
Section 172 Statement
Stakeholder Engagement
Stakeholder Engagement
The Directors are collectively responsible under section 172 of
the Companies Act to act in the way they consider, in good
faith, would be most likely to promote the success of the
Company for the benefit of its shareholders as a whole and to
take into account wider stakeholder needs when doing so. In
its considerations and decision-making processes the Board
therefore has regard to certain key matters including, but not
limited to, the long-term impact of the Company’s operations
on local communities and the environment and the need
to preserve the Company’s reputation for high standards of
business conduct.
The Board understands the importance of active engagement
with its stakeholders across the entire value chain, including
its employees, external suppliers and partners, and through
THG’s purpose and strategic priorities is focused on delivering
sustainable, long-term growth enabling the business to
generate positive and impactful change. THG is a global digital
innovator focused on transforming the retail experience for
consumers and brand owners and prides itself on building
strong business relationships to facilitate this.
Six internal and external stakeholder groups have been
identified as critical to THG’s future success. Details of these
stakeholder groups are provided below alongside why they
matter to THG and how THG and its Board has engaged
with them throughout the 2022 reporting period. The
values of leadership, innovation, decisiveness, ambition and
collaboration drive the engagement strategy across these
stakeholder groups.
Stakeholder
How THG Engages
How The Board Engages
Find Out More
Customers and
Consumers
We enable brands to
have direct relationships
with customers
and consumers by
providing a high-quality
retail experience and
establishing a relationship
of trust
• Through its brands via social media platforms
Indirect:
• Consumer surveys with insights shared with
and analysed by Senior Management
• Global digital content including THG Media’s
branded magazine portfolio and mobile apps
• Award–winning customer contact centre
• Rebrand strategy for THG Nutrition devised
considering consumer and market insights,
with roll out planned for 2023
• Launch of loyalty scheme LF Beauty Plus+
• Board presentations on customer satisfaction
scores and process improvements via the
Chief Experience Officer
• Monthly updates on key cybersecurity
enhancements via the Chief Technology Officer
• Monthly review of operational priorities in place
to deliver a high-quality customer experience via
the Chief Operating Officer
• Monthly updates from Divisional chief executive
officers on strategic priorities, including innovation
and brand partnerships with a focus on
understanding the benefits for customers
and consumers
THG Beauty
See page 21
THG Nutrition
and Wellness
See page 26
Governance Report
See page 105
Shareholders
• Annual report & accounts and RNS
Direct:
We seek to create value
for Shareholders and
through our purpose,
vision, values and
strategy, deliver long-term,
sustainable growth
announcements
• Scheduled investor presentations
and conference calls
• Corporate website
• One-to-one and group investor meetings
• Site tours
• Annual general meetings
• The Chair and SID are available to meet
Shareholders upon request
• The Chair has engaged with institutional
Shareholders regarding Board composition
and continues to do so
• The CEO and CFO have an ongoing
programme of meetings with institutional
Shareholders, supported by relevant members
of Senior Management
Indirect:
• The Board review and approves material
communication to investors, such as trading
updates results announcements, the annual
report and accounts, and significant
business events
Stakeholder
How THG Engages
How The Board Engages
Find Out More
THG Ingenuity Clients
• THG Orbit proprietary customer
Direct:
We support clients
on their digital
transformation journeys
service software
• Quarterly business reviews
• Attendance at annual Future of Commerce event
• Engagement with clients
THG Ingenuity
See page 32
• Customer satisfaction survey and net
promoter scores
Indirect:
• Face-to-face meetings and site visits
• Review of new and incremental business pipeline
Our Suppliers and
Partners
We promote open and
transparent working
practices and collaborate
for mutual, sustainable,
and commercial success
Our People
We aim to ensure THG
provides a supportive
environment with
career development
opportunities at all levels,
with a particular focus
on building the skills of
tomorrow
• Annual Future of Commerce event
• Quarterly webinar programme
• Monthly client newsletters
• eCRM campaigns
• Review of quarterly Ingenuity client satisfaction
and net promoter scores
• Monthly review of key technology
and platform developments
•
Implemented a programme requiring direct
suppliers to be signed up to Sedex from an
ethical sourcing perspective
• Risk assessment for all suppliers and a
process for reviewing and increasing audits
for higher-risk suppliers
• Strategic partners and suppliers identified
and engaged on carbon reduction matters
• Annual anti-bribery training undertaken by
the Procurement team
Indirect:
• Regular review of key raw material prices
and buying strategy
• Approval of development of in-house supplier
onboarding platform
• Regular review of THG Procure implementation
• Approval of the new Ethical Code of Conduct
• Regular review of partnerships and alliances,
to maximise strategic alignment and client reach
• Quarterly business reviews with Ingenuity
partners to assess sales pipeline, conversion
and joint marketing strategies
• The Board conducted a review of the Modern
Slavery Policy, Gifts & Hospitality Policy
and Anti-Bribery Policy
• Launch of Leadership
& Management Academy
Direct:
• Launch of the Black Community Network
by Executive Directors
• End-of-year colleague presentation delivered
• LGBTQ+ & Allies Society
• Partnership with Change 100
• THG Value Awards – inviting employees
to suggest a fifth company value
• Group-wide sustainability training
• H2 2022 launch of ‘Orbitor’ programme
which encourages a culture where quality
is as important as productivity
• Annual Divisional business strategy updates
with Senior Management
Indirect:
• Approval of Group Diversity & Inclusion
strategy and policy
• Monthly review of attrition and key recruitment
matters via the Group Talent Director
• The Board supported the addition of the fifth
Company value
• Reviewed and approved the updated role profiles
for the CEO, Independent Chair and SID
THG Nutrition
and Wellness
See page 26
Supply Chain
and Circularity
See page 66
THG Ingenuity
See page 32
Our People
See page 74
Diversity and
inclusion
See page 72
Society & Communities
We aim to build skills and
develop talent to promote
greater social mobility,
whilst protecting the
environments we operate
in and source from
• Engagement with key charities to support
those impacted by the war in Ukraine,
donating food and supplies
• Support for Ukraine-based employees
• Supporting local community projects,
including tackling homelessness, and
women and children’s charities
• Promoted THG’s Graduate Programme
to a wide variety of universities to attract
diverse talent
• Launch of Fantastic Futures
Indirect:
• Updates provided to Board on charity donations
to Ukraine
• Sustainability Committee approved Group Social
Impact Strategy
• Quarterly review of progress against the 2030
Sustainability Strategy
• Support for submission of net zero targets to SBTi
Sustainability
Strategy
See page 57
Investing in our
communities
See page 73
Our People
See page 74
47
48
Annual Report 2022
Stakeholder engagement:
Suppliers and partners
THG partners with suppliers to ensure it can continue to
address customers and consumers’ evolving demands. The
Board is committed to fostering and developing supplier
relationships in a way that empowers the brands we own
and those which we work with to drive innovative solutions
to consumer demands, while balancing the need to tackle
societal and environmental issues.
The Group’s Supplier Manual governs our relationships
with suppliers and ensures THG maintains high standards
of business conduct. THG’s purpose guides the ambitions
of the business to promote environmental and social
responsibility across the supply chain, positioning the
growth of the business in a sustainable way that enhances
long-term value creation for all stakeholders.
THG engages with each of its suppliers to establish suitable
payment terms with each individual supplier, recognising
that different businesses will have different cash-flow
pressures. All suppliers go through a relevant approval
process comprising:
•
•
•
•
•
Finance (financial security and fraud risk review)
Legal (contractual terms review)
Ethical (supply chain risk and ethical approval process)
Supplier quality assurance (technical and quality approval)
Senior Management (including Procurement
director) approval
In 2022, and with Board support, the Group initiated the
development of a proprietary supplier onboarding platform
within which suppliers will be able to share details to
support an open and transparent means of communication
with THG. The aim is to establish an efficient supplier set-
up process which allows key information to be provided to
THG on an ongoing basis (e.g. new social audits at their
sites). This platform will minimise the risk of suppliers being
onboarded without the relevant internal approvals and
completed documents in place. It will also provide a means
to communicate, store and update all required documents,
audits and updates.
THG Procure, a peer-to-peer (P2P) system, was rolled
out across much of the business in 2022 to support
timely supplier delivery bookings and payments. This has
significantly improved first-time invoice match rates to
improve our P2P efficiency and support supplier payment
on time performance.
Key outcomes
•
•
•
•
•
THG Procure covers 77% of suppliers and will be
rolled out across the remaining suppliers in 2023
78% of the Group’s own-brand suppliers1 have
signed THG’s Ethical Code of Conduct
62% of the Group’s own-brand suppliers1 are linked
to THG on SEDEX
Full ethical audits are in place across 45%
of own-brand suppliers
94% of the Group’s own-brand suppliers1 have been
made aware of our 2030 Sustainability Strategy
1. Group’s own-brand raw materials and finished goods suppliers.
Stakeholder engagement:
Customers and consumers
Our global customer base is served through our direct-
to-consumer sites across our portfolio of own-brands
and retail destinations. Understanding our customers and
how they like to purchase, discover new products, and be
made aware of new trends and solutions is essential for
developing our brands and ensuring they are relevant to the
markets they operate in.
We aim to enable a simplified customer journey, from
product discovery to checkout and delivery, which supports
our consistently strong online repeat-purchase rates within
our Beauty and Nutrition Divisions.
We continue to leverage our technology and operating
infrastructure to deliver deep local relevance in the markets
we operate in. For our customers and consumers, delivering
innovative products relevant to local markets and tastes,
together with a localised delivery proposition, has been
key to our strategy of domestic and international growth.
This was demonstrated in 2022 through new product
development and partnerships across Beauty (Sol de
Janeiro), Nutrition (Perfect Day) and Ingenuity (Bynder).
We are passionate about customer experience at THG and
our CX Operations became a finalist in the European Call
Centre Management Association in 2022, impressing the
judges with workload management, efficiency, and process
documentation.
Brand building through THG Media
We were proud to win the Shopping App Campaign
category at the App Growth Awards 2022. We first launched
our apps in 2019, and by the end of 2020, we had almost
2 million downloads. In 2022, we hit 10 million downloads
worldwide in multiple languages across our many brands,
with app sales accounting for 13% of Group D2C sales (7%
in FY 2021).
A huge contributor to this growth has been our marketing
strategy which has focused on creating exclusivity in our
apps. We also build dedicated plans around campaigns to
ensure customers download our apps before key trading
events to unlock exclusive offers, early access and new
product launches.
Our proprietary customer service solution THG Orbit
facilitates effective customer communication and order
management across the Group. During 2022, THG Orbit
integrated with social media platforms including Facebook
and Twitter, enabling brands to manage conversations
via those channels all-in-one platform, while delivering an
overarching view on key themes and trends. Investment
in efficiencies such as artificial intelligence suggested
templates and pre-populated content have driven
improvements in response times, and importantly, a
streamlined process for customer service agents. THG Orbit
is evolving into a market-leading contact centre as a service
product enabling Ingenuity clients to elevate customer
management while driving efficiency gains and supporting
customer retention through greater satisfaction levels.
Key Outcomes
• Over 16 million active THG Beauty
and THG Nutrition customers
•
•
•
•
Improvement in customer service SLA -
average customer response rate of 98%+
CX operations were successful in being a finalist
and a silver award winner in the 2022 UK Call
Centre Management Association awards
Passed customer service excellence audit gaining
6 additional compliance+ marks
Integration with Apple Pay launched across 12
own-brand apps driving higher checkout rates
49
50
Annual Report 2022
Principal decisions
The Board keeps under review its governance and operating
protocols to ensure long-term value creation is maintained.
The application of the Code has reinforced this approach
and the underlying governance controls and processes that
embed the ethos of Section 172 across the Group.
Detailed below are examples of the key discussions and
principal decisions taken by the Board during 2022 in the
context of the Group’s strategic priorities and the stakeholders
considered. In addition, the Board monitors principal and
emerging risks. Where such risks impact key stakeholders,
the Board will engage with those affected accordingly.
THG Strategic Priorities
Board discussions
and principal decisions
Stakeholders considered
Build category leadership positions in
• Oversight of the integration strategy
beauty, health and wellness
for the acquisitions made during 2021,
Customers and Consumers
including Cult Beauty and Brighter Foods
Shareholders
• Divisional reorganisation to simplify the
Group’s operating and reporting structure
Our Suppliers and Partners
• Support for the decision to consolidate
Our People
the UK warehouse network to realise
efficiencies from automation
• Appointment of Lucy Gorman as Beauty
Chief Executive Officer and internal
promotion of Neil Mistry to Nutrition
Chief Executive Officer
To make Ingenuity the partner of choice
• Monitoring of the separation
for commerce transformation and
of the Group’s business units
sustainability solutions
• Appointment of Vivek Ganotra
as Ingenuity chief executive officer
Customers and Consumers
Shareholders
THG Ingenuity Clients
• Review of the ongoing enhancements
to the Ingenuity platform with a particular
Our Suppliers and Partners
focus on cybersecurity
• Development of THG Orbit,
its integration with social media
partners and Ingenuity clients
Society and Communities
THG Strategic Priorities
Board discussions
and principal decisions
Stakeholders considered
Deliver engaging content and innovative
• The Board supported the partnership
products to our global customer base
between THG Nutrition and Iceland
Customers and Consumers
• Regular review of the innovation and new
product development pipeline
• Development of THG Media strategy
Shareholders
THG Ingenuity Clients
Our Suppliers and Partners
Society and Communities
Accelerate growth in core international
• Monitoring progress of the final stages
territories, leveraging our local
of the expansion of the Group’s global
infrastructure
warehouse and fulfilment network
Customers and Consumers
Shareholders
• The Board reviewed and approved the
updated Treasury Policy and Tax Strategy
THG Ingenuity Clients
• Support for investment in US warehouse
Our Suppliers and Partners
automation in New Jersey
Society and Communities
Drive positive change with our
• The Board approved the addition of the
stakeholders, through an entrepreneurial,
fifth Company value ‘Collaboration’
Customers and Consumers
values-led culture
• The Board approved the evolution of the
Company purpose following engagement
with employees across the organisation
through the employee value proposition
Shareholders
THG Ingenuity Clients
Our Suppliers and Partners
• The Sustainability Committee
monitored progression against the 2030
Our People
Sustainability Strategy and, in line with the
Group’s climate and nature targets, during
2022 our baseline carbon footprint was
established based on 2020 data and net
zero targets were submitted to the SBTi
for approval
Society and Communities
51
52
Annual Report 2022
Divisional reorganisation
Strategic review
Stakeholders considered
Stakeholders considered
Investment in price
protection strategy
£156 million term loan facility
agreement entered into in
October 2022
Shareholders
Customers and Consumers
Shareholders
Customers and Consumers
Stakeholders considered
Stakeholders considered
Our Suppliers and Partners
Our People
Our Suppliers and Partners
Our People
Shareholders
Customers and Consumers
Shareholders
Customers and Consumers
THG Ingenuity Clients
Our Suppliers and Partners
THG Ingenuity Clients
Principal decision by the Board
Principal decision by the Board
Principal decision by the Board
Principal decision by the Board
In May 2021, it was announced that the Group
was re-organising its legal structure to enable
underlying reporting companies to align with
business divisions and brands, and support
THG’s long-term growth strategy.
In October 2022, it was announced that the Group
had placed THG OnDemand under strategic review,
with the objective to scale back dilutive results within
non-core divisions. This review is now complete and
these operations will be fully exited by the end of
Q3 2023. Subsequently; the Board commenced a
strategic review of trading activities outside of THG
Beauty, THG Nutrition and THG Ingenuity.
In September 2022 it was announced that, in
response to the adverse macroeconomic conditions
and a period of unusually high-raw material costs
(principally whey), the Group had reviewed its trading
strategy and a decision to partially shield consumers
from inflationary pressures was implemented.
In October 2022 it was announced that, following
Board approval, the Group had entered into an
incremental £156 million banking facility.
Board considerations and outcome
Board considerations and outcome
Board considerations and outcome
Board considerations and outcome
The Board considered that reorganisation would
accelerate investment in divisional growth plans
and support expansion over the medium-to-long
term, as in some cases the current structure did
not align with the business activities. A Board
sub-committee was established to act in the interest
of stakeholders which received regular updates
on progress and key developments.
The transformation activity which was completed
during 2022 delivers value for Shareholders and
provides visibility over the profitability of each
Division. The Group will disclose further financial
information on its segments during 2023.
The Board considered that the strategic review would
deliver a simplified proposition to ensure the Group can
focus resources and capital on delivering the largest
opportunities available. Senior Management developed
a working group and presented the opportunities
available to the Board for further consideration.
Following review, the Board approved the proposal
to exit certain categories and territories which were
delivering loss-making results. The revenue and EBITDA
loss contributed from these areas has been disclosed
separately within the financial results to show the
impact of these decisions on the outlook of the Group.
The exits are underway and are expected
to be completed by the end of H1 2023.
The decision to pass on input cost inflation at a lower
rate to consumers was considered in conjunction
with the strategic priority to build category leadership
positions in beauty, health and wellness.
Whilst the Board noted the decision would have an
impact on gross margins, as commodity prices ease,
the Group remains well positioned to expand margins
back in line with historical periods. As cost-of-living
pressures rise, customers are continuing to prioritise
beauty, health and wellness categories and, through
investing in bringing them into and retaining them
within the THG ecosystem, long-term value for
Shareholders is considered.
The Board considered the terms and long-dated
nature of the facility would provide the Company
with considerable financial flexibility and additional
capital to drive its strategic priorities, principally
accelerating growth in core international territories
whilst leveraging our local infrastructure.
The facility was drawn down in October 2022
with the proceeds to be invested for the benefit of
customers and Ingenuity clients, in areas accelerating
growth namely investment in its capital expenditure
programme. The Board also considered the interests
of Shareholders and the appropriate balance of
capital allocation priorities.
53
54
Annual Report 2022 Non-financial information
The table below sets out where stakeholders can find information relating to the non-financial
matters as required under the Non-Financial Reporting Directive:
Reporting requirements
Some of the relevant policies
Where to read more in this report about our
impact, including the principal risks relating
to these matters
Environmental matters
• Environmental policy.
• Sustainability
• Sustainability Committee Report
• Task Force on Climate-related Financial
Disclosures (TCFD)
Page
Page 57
Page 141
Page 79
• Risk - Climate Change, Environmental
Page 91
and Social Responsibility
• Risk – Legal and Regulatory Compliance
Page 90
Employees
• Diversity & Inclusion Policy.
• ‘A winning culture’ - Chair’s Introduction
Page 3
Policy
Description
Environmental policy
THG is committed to doing business responsibly and reducing any adverse impacts of our operations on the
environment. Our Environmental Policy was implemented as part of our THG Sustainability Strategy (THG x
Planet Earth) to drive positive change in our business, supply chains, communities and for the planet.
Diversity & Inclusion policy
THG strongly believes that having a diverse workforce and an inclusive workplace creates a more innovative
and successful business. In 2022, we launched our Diversity & Inclusion (D&I) strategy, implementing a
range of initiatives built around our four pillars: visibility and representation, learning and development,
recruitment and progression, and accessibility and inclusion. Our D&I Policy has been implemented as part
of the D&I strategy and reflects our ongoing commitment to equal opportunity.
Modern Slavery policy
THG has a zero-tolerance approach to modern slavery, and we are committed to acting ethically and with
integrity in all our business dealings and working relationships. THG’s Modern Slavery Policy reflects its
commitment to acting ethically and with integrity in all its business relationships and to implementing
and enforcing effective systems and controls to ensure slavery and human trafficking is not taking place
anywhere in its operations and supply chains.
Health and Safety policy
THG takes a proactive approach to managing Health and Safety and our policy outlines the commitment of
THG and the expectations of managers, the leadership team and all colleagues. Our approach is for “Zero
Harm, Zero Compromise”.
• HR Handbook including all
people-related policies.
• ‘Our strategy’ & ‘Our People’
Page 11, 74
• Section 172 Statement Stakeholder Engagement
Page 47
Whistleblowing policy
• Diversity – Governance Report
• Risk - Talent
• Risk - Health & Safety
Human rights
• Modern Slavery Policy.
• Section 172 Statement
• Health and Safety Policy.
• Risk - Climate Change, Environmental
• Whistleblowing Policy.
• HR Handbook.
and Social Responsibility
• Risk - Health & Safety
• Risk - Product Safety and Quality
Social matters
• HR Handbook.
• Section 172 Statement
• Environmental Policy.
• ‘Empowering people and communities’ –
Sustainability
• ‘Our People’
• Diversity – Governance Report
• Risk - Climate Change, Environmental
and Social Responsibility
Anti-Bribery and Corruption
• Anti-Bribery Policy.
• Risk – Culture
• Gifts and Hospitality Policy.
Business model
Non-financial KPIs
Principal risks and
uncertainties
55
• Our business model
• Non-Financial KPIs
• Sustainability
• Risk Management
Page 105
Page 89
Page 91
Page 47
Page 91
Page 91
Page 91
Page 47
Page 71
Page 74
Page 105
Page 91
Page 92
Page 13
Page 22, 27
Page 57
Page 87
Anti-Bribery policy
Gifts and Hospitality policy
Our aim is to operate properly, responsibly and ethically whilst encouraging a free and open culture in
dealings between employees and all people with whom we engage. In order to protect our people, assets
and information, we recognise that effective and honest communication is essential if concerns regarding
breaches or failures are to be effectively dealt with and the company’s success ensured. THG whistleblowing
service is a free and professional service that enables all employees to raise their concerns confidentially. The
service is available to all THG staff, agency workers and contractors. An update on all whistleblowing cases
is provided to the Audit Committee on a quarterly basis. This update provides details on the investigations
undertaken and the outcomes of these investigations.
THG is committed to conducting its business with complete integrity and in a manner which ensures
compliance with all applicable laws and with the highest ethical standards. As a company, we use our best
endeavours to ensure that all those acting on our behalf, whether they are employees, contractors, third-
party intermediaries or agents, are aware of and share our commitment to conducting business ethically.
Our Anti-Bribery Policy summarises the Company's position in relation to ethical standards, including
bribery.
THG considers the offering and receipt of corporate hospitality to be a part of establishing and enhancing
good relations with our business partners, including suppliers, customers and other business partners.
However, giving or receiving hospitality or gifts which are excessive or inappropriate does not help to build
good relations and may create the impression of undue pressure or improper influence. This could damage
our reputation. In some cases, gifts or hospitality may be considered to be bribes under applicable Anti-
Bribery law, with consequent criminal penalties. It is therefore essential that our employees and Directors
comply with this policy whenever giving or receiving gifts or hospitality to or from the Company's business
partners, or otherwise in the context of the Company's business.
A review of each of the above policies is considered on an annual basis. Following our 2022 review, a number of policies
were updated where appropriate.
An integrated training and policy platform continues to be maintained, which facilitates the rollout of policies to
appropriate audiences. This platform allows subsequent monitoring of completion rates for the reading and acceptance
of these policies at an individual level, promoting awareness and conformance to our policies.
56
Annual Report 2022 Sustainability
As a global vertically integrated business, we are acutely
aware of the impact large organisations have on the
planet, and the great responsibility and influence we hold
with our people, communities, suppliers and customers
both in the UK and internationally. We have always been
focused on reinventing online retail for the better and are
committed to use our global scale, our world-class talent
and our dedication to innovation, to act as a force for good.
Collective action is required to address global issues such
as climate change and social inequality, and in the past
few years we have seen governments and corporates
set ambitious goals to tackle such issues. At THG, we are
committed to do our part and work with all our partners
to become more sustainable, together.
2022 Impact
63%
Renewable electricity
use across our operations
26%
Ethnic minority representation
in Apprenticeship and
Graduate schemes
45%
Female representation
in Apprenticeship and
Graduate schemes
390
Ethical Audits conducted
on our supplier factories
Materiality assessment
THG x Planet Earth
Against the challenging external backdrop of increasing
severe weather events and global economic issues,
we remain committed to driving forward the Group’s
Sustainability Strategy, THG x Planet Earth, to achieve
our sustainability vision:
To act as a force for good in leaving the world a better place than
we found it, by using our scale, our partnerships, our access to
capital and our unique capacity for innovation to promote and
embed sustainability into everything we do.
It is important to assess and understand the potential
challenges and opportunities, as well as the topics,
that are most important to THG and its stakeholders.
In early 2021, a materiality assessment was undertaken
which led to the development of the Company’s first
Sustainability vision and strategy. To define the material
topics most relevant to THG, senior internal stakeholders
and external investors were engaged to gain an
understanding and view as to the most material issues
that could affect the Company’s operations, both now and
in the future. The goal was to obtain a complete picture
of the environmental and social sustainability impacts,
resulting in a set of prioritised material issues. Five key issues
were identified including: Climate, Nature, Waste, Supply
Chain and People – these formed the foundations of our
Sustainability Strategy, THG x Planet Earth.
The full list of issues, and the process behind the materiality
assessment, can be found in last year’s Annual Report,
pages 89-90.
Our Sustainability Strategy is centred
around three priorities:
01.
Protecting Climate
and Nature
02.
Strengthening our
Supply Chain and
Circularity
03.
Empowering People
and Communities
Since the launch of THG x Planet Earth in October 2021, we
have been laying the foundations to ensure we can deliver
the ambitious targets set under each of these priorities.
We have made good progress in many areas including;
submitting our net zero plans to the Science Based Targets
initiative (SBTi) for approval, which is detailed in the Climate
section on page 61. We have evolved our sustainability data
management and reporting, by building a sustainability
data management and reporting platform with an external
partner. This has enabled us to gain greater insight into our
sustainability performance, allowing us to not only capture
and report on data, but also track and analyse progress.
Better sustainability data management and reporting unlocks
the ability to report on sustainability-related disclosures
and help other parts of the business to deliver sustainability
programmes such as energy forecasting and site-level
energy efficiency plans. Our enhanced sustainability
reporting capabilities have allowed us to report on new
sustainability metrics for the first time, such as the number
of sites in water-stressed areas. As we develop the platform
further, we will report on a greater number of metrics over
time which is integral to reaching our goals and targets as
set out in THG x Planet Earth.
Throughout 2022, we strengthened our sustainability
expertise, building a wealth of skills, knowledge and passion
to lead group-wide initiatives within our strategy, alongside
the development of our sustainability reporting and data
management approach.
There is still more to do, but we remain on track to deliver
many of our goals and targets within our THG x Planet Earth
Strategy. We are proud to share the progress against the
targets in this report.
As previously communicated, to ensure our strategy and
targets remain relevant, the targets will be reviewed, and
if required, updated, at least every two years (next review
scheduled for 2023). As per our sustainability governance
process, any changes will be reviewed by the senior
leadership team, the Sustainability Committee and
submitted to the Board for final approval.
57
58
Annual Report 2022 THG Eco
The challenges of taking effective climate action inspired
THG to establish THG Eco: a dynamic service solution
based on the purpose-led proposition of ‘simplifying
sustainability’. THG Eco simultaneously powers THG’s wider
sustainability targets, while also providing uncomplicated
and cost-effective sustainability services to our clients,
partners and suppliers. We break down the mammoth task
of facing an opaque and misunderstood market, facilitating
investment in practical and transparent solutions that serve
businesses throughout their sustainability journey.
cyclical process, we have helped our suppliers accelerate
change within their own supply chains to collectively
mitigate climate risk, while also reducing operational costs.
Our support for our network starts with annual carbon
footprint measurement and analysis, life cycle assessments
through to net zero target setting and SBTi submissions.
We pave the way for emissions reduction through
renewable energy certifications, carbon offsetting and net
zero road mapping.
The primary focus of THG Eco in 2022 has been to assist
our network in taking climate action. By establishing a
Our recent work with Ideal Standard exemplifies how
businesses gradually leverage change using our cyclical
sustainability model:
C L I E N T C A S E S T U D Y
THG Eco supports Ideal Standard to improve GHG reporting
Ideal Standard is a multinational manufacturer of
sanitaryware products, headquartered in Belgium.
To align with an increasingly environmentally-
diligent market, Ideal Standard set out to measure
and set meaningful actions and targets to reduce
their greenhouse gas (GHG) emissions across their
manufacturing network in 2021.
They worked with THG Eco to collect and analyse GHG
data across their global network of 13 manufacturing
sites and offices. Guided by GHG Protocol requirements,
Ideal Standard and THG Eco analysed their Scope
1, 2 and partial Scope 3 emissions, covering fuel
and energy-related activities, employee commuting,
shipping, waste, inbound water and business travel.
THG Eco worked with Ideal Standard to develop
an approach that would produce a meaningful and
representative GHG Report. Where data was not
available, THG Eco collaborated with local teams to
outline alternative solutions. Where this was still not
possible, industry-standard emission factors were
sought and applied, following extensive research.
This data was included in the final GHG Report, along
with the source of each emission factor to support
calculations and highlight where further clarity could be
sought when completing the exercise, the following year.
THG Eco ran a series of virtual workshops for 100+ Ideal
Standard employees both before and after the carbon
footprinting exercise. The sessions before the activity
were designed to educate and encourage participation,
while the sessions after delved into the report’s results
and feasible next steps. Both were very well received.
THG Eco’s final GHG report broke down Ideal
Standard’s emissions by location and scope. This
PARETO hotspot analysis pin-pointed areas of the
business with concentrated emission output, allowing
Ideal Standard to make strategic, operational decisions
to reduce their footprint. THG are now exploring next
steps with Ideal Standard to recalculate Scope 1, 2
and full Scope 3 emissions across 2022 data to review
reduction activities and work towards carbon neutrality.
Protecting Climate
and Nature
Recognising the urgency to take action against climate
change, Protecting Climate and Nature is the first of the
Group’s three key priorities outlined in THG x Planet Earth.
Our priority around these issues echoes the sentiment
shown at COP27 and the 15th Biodiversity Conference,
highlighting the need for everyone to take action, including
businesses like ours where we have a global footprint.
THG operates in multiple categories and across the whole
value chain – which is why we have set ambitious targets
around carbon, water and nature that apply, not only to
ourselves, but also to our supply chain partners.
Targets
Climate and Nature
Performance in 2022
Status
Submit net zero baseline and targets
for validation by SBTi by 2022
Science-based targets submitted to SBTi for validation
Complete
Offset all of THG’s direct historical
emissions by 2025
-
On track
Transition to 100% renewable
electricity for own operations by 2025
63% of our electricity is from renewable sources
On track
50% of suppliers and THG Ingenuity
partners1 to set carbon reduction
targets by 2025
48% of our own-brand top 50 suppliers (by 2022 spend) are
working on carbon reduction and climate-related initiatives.
In 2023, we aim to start collecting data on suppliers who
have set carbon reduction targets specifically
On track
100% sourced agricultural materials
to be deforestation-free for own-
brands by 2025
Top 20% of own-brand suppliers
(by impact1) to introduce restorative
agricultural practices by 2030
-
-
Due to
commence
in 2023
Due to
commence
in 2023
30% reduction of water use in
water stressed and own operation
sites by 2030
We identified 13 sites located in water stressed areas
and 4 sites located in high-risk flood zones
On track
25% of own-brand product and
ingredient suppliers to disclose
water usage and adopt water
stewardship by 2030
34% of own-brand top 50 suppliers (by 2022 spend) are
working on water reduction and stewardship initiatives
On track
59
1. Measured by % spend.
60
Annual Report 2022
Climate
Science-based targets
At THG we have set ambitious targets to be climate positive
and address the environmental impact of our greenhouse
gas (GHG) emissions. Throughout 2022, we established
our baseline carbon footprint, based on 2020 data, and
submitted our net zero targets to the Science Based Targets
initiative (SBTi) for approval. We are scheduled to receive the
outcome of our submission in the second half of 2023. In the
meantime, we are developing detailed divisional roadmaps
to drive delivery of our carbon reduction commitments. We
submitted both near-term and long-term targets, with the
aim of achieving net zero emissions by 2040. This goal is a
further demonstration of THG’s desire to make a significant
change to the world in which we operate.
Value Chain (Scope 3)
Emissions Baseline
The development of science-based targets requires
robust and comprehensive calculation of all greenhouse
gas (GHG) emissions to identify where we need to target
our efforts. GHG emissions are split into three categories:
Scope 1 emissions, which are GHGs released directly from
an organisation; Scope 2 are indirect emissions which are
released from the energy purchased by an organisation; and
Scope 3 emissions, which are also indirect GHG emissions,
and aren’t directly controlled by the organisation but are
related to their activities.
Achieving net zero requires changes across all business
areas - Scope 3 emissions comprise the largest portion of
our carbon footprint and account for around 98% of THG’s
total emissions. This is primarily driven by purchased goods
and services, alongside upstream transport and distribution.
It will require significant, ongoing engagement and
collaboration with our suppliers to drive emissions reduction
across this category.
We will track our progress against all GHG emission
categories, to ensure we achieve our 2040 net zero target
and will report our Scope 3 emissions on a periodic basis,
alongside our regulatory obligations to report Scope 1 and 2
emissions, providing increased visibility of our performance
in this area.
Value Chain (Scope 3) emissions
by source for 2020 baseline
Climate risk
Given the significant risks climate change poses to the
planet, it is important to understand how this may also
impact THG’s business activities. We are committed to
report in alignment with the Taskforce on Climate-Related
Financial Disclosures (TCFD) framework. Our disclosure
and progress towards full TCFD alignment can be found
on pages 79-82.
Renewable electricity
In 2020, we switched many of our UK sites to renewable
electricity contracts. This contract was recently extended
which will increase the number of sites using renewable
electricity over the coming years and is a big driver behind
our current figure of 63% of electricity from renewable
sources. We also have solar panel installations at some
of our manufacturing sites. However, we know there
is much more to do. As our international operations
continue to grow, we must look at ways of increasing
our use of renewable electricity beyond the UK. We are
actively investigating employing instruments, such as
power purchase agreements and further on-site energy
generation from solar, both in the UK and across our
international sites as part of our target to achieve 100%
renewable electricity usage by 2025.
Supplier engagement
on carbon reduction
The majority of THG’s carbon emissions lie within our value
chain and we recognise the importance of addressing our
sustainability targets in this area. Following our carbon
footprint measurement and assessment, the need to
focus on Scope 3 emission reduction was clear. Scope 3
represents 98% of THG’s total emissions, with suppliers of
third-party finished goods and raw materials of THG brands
contributing a significant proportion of this. During 2022,
significant progress was made in gathering data relating
to these suppliers, with 48% of these top 50 suppliers (by
spend) confirming they are actively engaged in carbon
emission reduction and climate-related initiatives in 2022.
Focusing on the top 50 suppliers allows us to strategically
address those suppliers with the largest impacts. By the end
of 2023, we aim to report how many of these suppliers have
set specific carbon reduction targets.
We continue to develop systems to support the collection
of wider supply chain sustainability data such as supplier
attributes; credentials related to carbon emissions,
deforestation, water stewardship and waste. This will
enable the assessment of a baseline position and tracking
performance against supplier-related targets aligned
with THG x Planet Earth. We have expanded the supplier
sustainability assessment criteria and incorporated it into the
newly-developed supplier portal tool which will be rolled out
in 2023. All new and existing suppliers will also be engaged
and required to complete a more rounded sustainability
assessment. In turn, this exercise will provide a deeper
understanding of potential gaps and risks in our supply
chain, which can then be addressed accordingly. We aim to
have all finished goods and raw material suppliers complete
the sustainability assessment by the end of 2023.
68.1% Purchased goods and services
8.2% Capital goods
2.2% Fuel and energy-related activities
16.6% Upstream transport & distribution
0.2% Waste generated in operations
0.03% Business travel
1.7% Employee commuting
1.0% Upstream leased assets (data centres)
1.2% Use of sold products
0.7% End-of-life treatment of sold products
Electricity used to power
our operations in 2022
Non-
Renewable
37%
Renewable
63%
61
62
Annual Report 2022
Emissions and energy consumption figures in 2022 are
higher than previous years, due to a combination of
factors: 1) increase in operational activity due to business
growth and 2) improvement in data-capturing processes,
availability and quality.
In 2022, we continued the purchase of renewable
electricity certificates at several UK sites, and also
installed LED lighting at our acquired sites to improve
energy efficiency. By building our sustainability reporting
platform we can focus on tackling energy use at our
highest consuming sites, and the enhanced data
capabilities mean we can also now report on our Scope 2
market-based emissions.
Details on how we calculate our GHG emissions and
energy can be found in our Basis of Reporting document.
Energy use by source (kWh)
– Scope 1 and 2)
Fleet and On-Site Fuel
3,889,419
Renewable
Electricity
24,704,347
Natural
Gas
23,275,342
Non-Renewable
Electricity
14,653,685
THG’s GHG emissions and energy reporting
The Group’s GHG emissions reporting calculation is undertaken in line with our obligations within The Companies Act 2006
(Strategic Report and the Directors’ Report) Regulations 2013, and the Streamlined Energy & Carbon Reporting regulations,
March 2019. GHG emissions are reported in accordance with the GHG Protocol. The reporting year for GHG emissions in
the Group ran from 1 January 2022 to 31 December 2022.
GHG emissions (Tonnes of CO2e)
Scope 1 emissions
2022
5,1942
2021
2,309
20201
1,946
Generated from the gas and oil used in buildings
where the Group operates; emissions generated
from Group owned and operated vehicles for
business travel
Scope 2 emissions
13,2382
11,605
9,584
Generated from the use of electricity in all
buildings from which the Group operates.
Total
GHG Intensity per £1m revenue
18,432
8.23
13,914
6.39
11,530
7.14
Energy use (kWh)
2022
2021
20201
Natural Gas
Electricity
23,275,342
12,051,833
9,943,330
39,358,032
28,653,493
19,649,394
Fleet and On-Site Fuel
3,889,419
590,717
488,578
Total
66,522,7932
41,296,043
30,081,302
Energy Intensity per £1m revenue
29,707
18,952
18,638
Energy use (kWh)
2022
2021
2020
UK
Overseas
Total
42,682,049
23,332,220
23,840,744
66,522,7932
17,963,822
41,296,042
16,833,917
13,245,455
30,079,372
We reported the above emissions on a location-based approach in line with the GHG Protocol. Following a market-based
approach, our Scope 2 emissions for 2022 were 9,1572 tonnes of CO2e and our total Scope 1 and 2 tonnes of CO2e were 14,351.
1. Minor revisions (not material) to reflect SBTi targets submission.
2. Assured by Bureau Veritas – for further details please see our Reporting Basis document.
63
Note: Table subject to rounding.
64
Annual Report 2022 Nature
Responsible sourcing
Supporting our goal to have a net positive nature impact
across our brands, we have made the commitment to
achieve 100% of our sourced agricultural materials for our
own-brands to be deforestation free by 2025. Deforestation
continues to drive biodiversity loss, habitat damage and also
contributes to global warming, so reducing our impact on
this devastating practice will be a key focus for THG in 2023.
As we develop our deforestation strategy, there will be a
specific focus on palm oil and palm-derived products, given
the widely known concerns between the two. Our approach
to sourcing palm oil and palm products will be reviewed and
we will develop a group-wide policy, to drive a consistent
approach across all areas.
Strengthening our
Supply Chain and Circularity
We have a duty to ensure our supply chain is responsible,
ethical and does not adversely affect people or the planet.
The goals we have set within our strategy focus on
protecting human rights, eliminating modern slavery within
our supply chain, and ensuring we can transform the waste
from our operations into resources.
We have made significant progress with our ethical
sourcing outreach programme, reaching out to every
one of our own-brand suppliers as part of our outreach
programme. We have also calculated the baseline position
for the packaging to understand the current levels of
recyclability, and developed a roadmap to drive towards
100% recyclable packaging by 2025.
Supply Chain and Circularity targets Performance in 2022
Implement a progressive Human
Rights Policy by 2023
We are developing a standalone Human Rights Policy, and in
parallel we have implemented new ethical standards across
our supply chain and are embedding the process across
internal stakeholder groups.
Status
On track
All own-brand goods suppliers to
commit to THG’s ethical sourcing
standards by 2025
THG has an extensive supply chain, consisting of finished
goods and raw materials suppliers split across THG branded
and third-party brands sold on our THG online platforms.
On track
100% of own-brand packaging
to be recyclable, reusable or
compostable by 2025
Zero waste to landfill from
our own operations by 2030
In 2022, attention was focused on own-brands’ suppliers
of finished products, and raw materials contributing to the
make-up of these products. Throughout 2022, 78% of these
suppliers committed to THG’s Ethical Code of Conduct
which outlines the ethical sourcing standards.
A baseline assessment of packaging across the three
key divisions: THG Beauty, THG Ingenuity and THG
Nutrition was undertaken in 2022. Roadmaps have been
developed to identify the key milestones and actions to
drive target delivery.
Collection of waste data across all sites began towards
the end of 2022. Full waste data collection and analysis
relating to all global sites will be completed in 2023.
In 2022, our Poland facility, one of our largest manufacturing
and fulfilment sites, sent zero waste to landfill.
On track
On track
We recycle more plastic than we
produce by 2030
The amount of plastic we use was collated in 2022, based on
2021 data, as part of the data collection to assess recyclability
of our own-brand packaging. This work will continue in 2023
to establish our baseline position as we compare this with
the plastic recycled across THG’s three recycling centres.
On track
70% of packaging from third-party
brands to be recyclable, reusable or
compostable by 2030
Many of the brands THG partners with are already
taking positive action and increasing the recyclability of
their packaging. During 2023, a baseline position will be
established to understand and determine where further
engagement is required.
On track
66
Supplier engagement on water use
Water stewardship across our supply chain is an important
area for us to tackle, especially given the growth of our
business and global nature of our partners and suppliers.
While we have been obtaining data across own-brand raw
material and finished goods suppliers, in order to focus
our efforts on where we have maximum impact, we have
assessed supplier performance associated with water use for
those aforementioned Top 50 suppliers (by spend) – in 2022,
34 of those suppliers were conducting activity around water
stewardship and reduction.
Water
Water use in our operations
In late 2022, we began collecting data around water use
across our sites, which has enabled us to start working on
calculating a baseline for our water reduction target.
To improve water data quality, we are exploring the
installation of automatic meter readers across several UK
sites, with implementation expected to begin in 2023.
We have mapped out sites which are located in water-
stressed areas using the WRI (World Resources Institute)
Aqueduct tool – the results indicate 13 sites are situated
in water-stressed areas. However, we are aware that in
the future this may change, and we will continue to look
at water efficiency measures across all sites. In addition
to water stress, we also looked at sites located in 100-
year flood zones, with results showing that only 4 sites
are in such zones – again we will monitor this carefully. In
2023, we will undertake climate-risk modelling as part of
TCFD recommendations which will further enhance our
understanding of climate-related risks such as water stress.
65
Annual Report 2022 Supply Chain
Mapping
Percentage of factories
in each country
16%
OTHER
COUNTRIES
In line with our Supply Chain Mapping & Ethical Outreach
Programme, at the beginning of 2022, supplier outreach work
started on own-brand raw materials and finished goods suppliers
(excluding acquisitions). From June 2022, the programme was
extended to include all THG acquisitions.
As of 2022, we have reached out to every own-brand raw
materials and finished goods supplier and successfully mapped
out production units among 62% of suppliers. A breakdown
of manufacturing units across the top-10 sourcing countries is
illustrated on the map:
8%
USA
27%
UK
Divisional breakdown
by country
Key
Nutrition
China
United Kingdom
Beauty
United States
Germany
India
Netherlands
Italy
France
Poland
Turkey
Other Countries
Packaging
Other1
67
1. Gifts, Luxury, Homeware & Apparel.
68
27%
CHINA
2%
FRANCE
2%
TURKEY
3%
ITALY
4%
INDIA
3%
NETHERLANDS
6%
GERMANY
2%
POLAND
Annual Report 2022 Human Rights
During 2022, the supply chain sustainability team focused
extensively on implementing new ethical standards across
our supply chain and embedding the process across
internal stakeholder groups. Legacy suppliers were engaged
alongside all new suppliers. Our key areas of focus were:
•
Supply chain ethical sourcing process development
and implementation including - due diligence
and prerequisites such as new supplier validation,
continuation of our SEDEX (an international ethical
supply chain assessment platform) membership,
capabilities and accreditation assessments, and
mandatory third-party ethical audits.
• Modern slavery and human rights – including
development and implementation of THG’s Ethical
Code of Conduct and ethical requirements agreement,
internal audits, a tailored labour & modern slavery audit,
as well as a supply chain ethics onboarding policy for
direct & indirect procurement.
•
•
•
Supply chain mapping and transparency programme
– engaged THG branded goods and raw material
suppliers in a global outreach programme designed to
successfully map our supply chain.
Supplier onboarding portal – development of THG
supplier portal expected to be rolled out and integrated
into supplier onboarding/management in 2023.
Awareness and training – procurement teams received
training on the importance of human rights across the
supply chain and their role in ensuring THG responsibly
source new suppliers across procurement.
Supplier commitment to our
ethical sourcing standards
We have been building the foundations and outlined the
principles of THG’s ethical sourcing programme, an Ethical
Code of Conduct, with reference to International Labour
Organisation (ILO) standards. Own-brand suppliers are
expected to acknowledge the values and standards set out
around ethics and supply chain transparency, by signing, as
well as delivering the requirements to their corresponding
upstream suppliers.
The programme includes the ethical sourcing onboarding
process, whereby all new suppliers are required to fulfil
minimum requirements. Pre-requisites comprise validation
of credentials, supply chain mapping, SEDEX membership,
third-party ethical audit and risk assessment.
Current approved suppliers are also held to the same
standards within their approved life cycle. All suppliers
must adhere to the standard set out within the ethical
programme on a continuous basis. Suppliers not committed
to the programme are escalated to Senior Management for
business review.
In the first year of our ethical supply chain programme, 514
suppliers, equivalent to 78% of our own-brand raw materials
and finished goods suppliers, signed up to our Ethical Code
of Conduct. Looking beyond 2022, we are striving towards
having 100% of our own-brand finished goods and raw
material suppliers engaged in the programme and aligned
to our ethical audit requirements. In 2022, we obtained and
reviewed 390 ethical audits from supplier factories - 44% of
our factories were audited and all new factories onboarded
are now subject to audit. As our ethical supply chain
programme develops, we will continue to build our audit and
engagement capabilities with our suppliers.
Zero waste
Own-brands plastics and packaging
Plastic pollution is a world-wide issue, requiring urgent
and consistent action to reduce the volume of plastic
waste which significantly impacts natural habitats on land
and in the ocean. Around 36% of all plastic produced is in
packaging and around 85% of this ends up in landfill
or as unregulated waste, which isn’t subject to waste
controls. The issue around plastic is not only about waste;
most plastic is derived from fossil fuels and therefore the
continued increase in the use of plastic, and particularly
virgin plastic, results in greater greenhouse gas emissions.
At THG, we are committed to playing our part in addressing
this global issue by ensuring our own-brand packaging
is 100% recyclable by 2025. THG is a member of the UK
Plastic Pact, and along with more than 120 businesses
and organisations from across the entire plastics value
chain, has also committed to increase the level of recycled
content within our packaging to at least 30%, which will see
a reduction in the amount of virgin plastic placed on the
market, but also a reduction in carbon emissions. In 2022,
we assessed the recyclability of all packaging across our
largest divisions to establish a baseline position and have
developed roadmaps to drive the delivery of the targets over
the next three years. We have already made changes to our
Lookfantastic Subscription Beauty Box to reduce the amount
of packaging and ensure the outer box is 100% recyclable –
read our case study on page 23.
Waste in our operations
The ability to manufacture products in-house gives us an
edge, being able to quickly develop innovative and improved
products by responding to consumer demands and changes.
However, manufacturing operations produce waste, and it is
important that organisations take responsibility for the waste
they produce. In 2022, a group-wide waste assessment was
initiated (which will be completed in 2023) to understand the
total quantity of waste produced by THG, as well as where it
is produced and the differing types of waste. By applying the
waste hierarchy and circular economy principles, we aim to
reduce the amount of waste produced across the business,
reduce costs and ensure any waste that is produced does
not end up in landfill – in line with our target of zero waste
to landfill by 2030.
An example of our commitment to achieving this target
is illustrated by the fact that THG’s Polish fulfilment and
manufacturing facility sent zero waste to landfill in 2022.
Similarly, Myprotein studied how to utilise unused protein
powder which would have ended up as waste. By partnering
with a specialist waste recycling company, the powder is
now repurposed to become fish food used by the angling
community. Innovative initiatives such as this further
demonstrates our commitment of reducing waste and
applying circularity principles. Our responsibility doesn’t
stop with our own operations; we have also committed to
addressing our downstream waste - Lookfantastic, ESPA
and Cult Beauty have introduced refillable products - giving
consumers the ability to reduce their own waste footprint.
We are committed to waste reduction and circularity and will
continue to explore opportunities where we can reuse waste
and materials.
Waste types in our
Poland facility in 2022 (tonnes)
Other: 3%
38
Wooden
Packaging:
5%
61
Metal: 19%
250
Plastic
Packaging:
5%
71
Paper
& Cardboard
Packaging: 39%
519
Mixed
Packaging:
25%
336
Organic: 4%
51
Recycling our plastics
During 2022, the baseline position for the packaging we
place on the market was established using 2021 data. In
2023, our aim is to compare the amount of plastic recycled
through our THG Eco recycling companies with the amount
of plastic placed on the market by THG brands. This will
include assessment of the differing polymer types to ensure
like-for-like comparisons and enable the development of
roadmaps to deliver the target by 2030.
Third-party brands packaging
In addition to setting packaging recyclability targets for all
own-brand products, THG has also committed to engaging
with suppliers with the aim of improving the recyclability
of packaging used in third-party finished products. Many
third-party suppliers have already started to make changes
to their packaging and in 2023 THG will commence a
proactive programme to engage with the suppliers of third-
party brands to fully understand what level of change is
required to drive progress in this area, ahead of 2030.
69
70
Annual Report 2022
Empowering People
and Communities
As a global business, we operate across many countries,
impacting not only the 8,000+ people that work within
the business, but also across the whole value chain from
our supply chain to local communities. The third priority
within our THG x Planet Earth Strategy focuses on three
areas – diversity and inclusion, employee wellbeing and
development and investing in our communities.
In 2022, we’ve solidified the foundations of reaching
our goals – developing our first diversity and inclusion
strategy and social impact strategy - further details
can be found on pages 77-78.
Diversity and inclusion goals
The Group’s D&I vision is to further create a diverse,
inclusive and supportive work environment, reflective of the
communities within which THG operates and comprising
talented and motivated individuals.
As part of THG x Planet Earth, we set ambitious targets
around diversity and inclusion - the performance and
progress towards these targets can be found below:
Percentage of female representation in our
Graduate and Apprenticeship programmes
Percentage of female representation
at Board and senior leadership level
Empowering People and
Communities targets
Performance in 2022
45% female and 26% ethnic minority representation
in Graduate and Apprenticeship schemes
Status
On track
2020
2021
2022
49%
54%
45%
Target to 2025:
50%
2020
2021
2022
20%
25%
22%
Target to 2030:
50%
Achieve 50% female
representation and at least 20%
ethnic minority representation
in Graduate and Apprenticeship
schemes by 2025
Achieve 50% female
representation and at least 15%
ethnic minority representation
on the Board and Senior leaders
by 2030
22% female and 6% ethnic minority representation on the
board and senior leadership team
On track
Eliminate gender and ethnicity
pay gaps across all THG
divisions by 2030
Gender Pay Gap information can be found on the UK
Government online Gender Pay Gap service portal.
Ethnicity pay gap to be determined in the future as we
continue to improve on gathering more data in this area
On track
Achieve at least 15%
improvement in employee
engagement score by 2025
Pay all direct staff, agency
workers and contractors
a living wage by 2025
We will be undertaking our baseline for employee
engagement scores in 2023
Due to
commence
in 2023
70% of UK direct staff (excluding agency workers and
contractors) are paid a Real Living Wage
On track
All Tier 1 suppliers to pay
a living wage by 2025
Primary focus in 2022 has been on direct staff and we will
review this target in 2023
Provide 10,000 people in the
community with technology
and life skills training by 2030
With the introduction of the Social Impact Strategy, we
will aim to identify opportunities to support communities
through training of these important skills in 2023
Introduce two days volunteering
per year for every THG employee
by 2025
Our approach to colleague volunteering is outlined in our
Social Impact Strategy. This will be rolled out in 2023
Due to
commence
in 2023
Due to
commence
in 2023
Due to
commence
in 2023
Percentage of ethnic minority representation
in our Graduate and Apprenticeship programmes
Percentage of ethnic minority representation
at Board and senior leadership level
2020
12%
2021
2022
17%
26%
Target to 2025:
20%
C A S E S T U D Y
2020
2021
2022
6%
6%
6%
Target to 2030:
15%
Engaging our people around
diversity and inclusion
In 2022, we organised several events which aimed to
bring attention and understanding to groups which
can face discrimination and inequality. Providing
these engagement opportunities which celebrated
the identity and different backgrounds of our staff,
we hope to increase their sense of belonging
and educate the wider workforce on being more
inclusive and respectful in the workplace.
Some of the events held in 2022 included panel
and lunchtime sessions for International Women’s
Day, Lunar New Year, Pride Month and Mental
Health Awareness Week. We also hosted our first
Black History Month forum where external speakers
shared their experience and achievements in their
careers. To deepen engagement and to drive impact,
in 2022 we set up the Black Community Network
alongside our LGBTQIA+ and Allies Network which
was set up in 2021.
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Annual Report 2022
paying all THG staff a Real Living Wage by 2025. The initial
focus around living wage is on our own staff, contractors
and agency workers where we have greater control and
influence. With regards to suppliers, this is significantly
more complex given the international nature of our supplier
base and the lack of living wage standards in many
countries. During 2023, we will continue to assess the best
approach to deliver against the target.
Investing in our communities
Training in our communities
Our innovation in technology and digital platforms allows
us to leverage our knowledge and expertise to benefit local
communities. With the development of our Social Impact
Strategy, we will aim to identify opportunities to support
communities through training of these important skills.
In 2022, THG made significant efforts to provide aid and
support to those affected by the conflict in Ukraine.
Our People teams worked diligently to provide physical
and mental health support to our Ukrainian colleagues
around the world, and our security teams helped to safely
relocate those colleagues and their families who made the
difficult decision to leave their homes in Ukraine. We also
supported our Ukrainian colleagues in the UK, including
assisting those who were making arrangements for their
loved ones to join them.
In addition to supporting our own colleagues, we
recognised the urgent need for broader assistance in the
region. Through partnering with national and international
organisations, we were able to provide product donations
via our fulfilment centre in Poland. These donations
included essential items such as food, clothing and hygiene
products, which were distributed through local partners
to the areas of greatest need.
Our approach to colleague volunteering is outlined in
our Social Impact Strategy. This will be rolled out in 2023,
providing colleagues with a clear framework for community
engagement and volunteering.
Gender and ethnicity pay gap
In 2022, the focus was on improving the quality of
employee data including gender and ethnicity which
has helped improve our diversity target progress. Better
measurement of the current situation against targets
and development of programmes allows us to build a
workplace where all employees can thrive. We report on
our gender pay gap via the UK government gender pay
gap service every year. Efforts to collect a greater range
of diversity data will continue throughout 2023 with a
goal to report on our ethnicity pay gap in the near future.
Employee wellbeing
and development
Sustainability training
Ensuring that THG’s Sustainability Strategy remains
at the heart of our business and is a clear focus for all
colleagues will continue to drive successful delivery. In
2022, a new induction session was introduced for all
colleagues so that they understand the strategy from day
one and are clear how they can play a part in its delivery.
To maintain this momentum, a series of six sustainability
learning modules were introduced, designed to
enhance colleagues’ understanding and engagement
in sustainability, the first of which was launched in late
2022. The remaining learning modules will be delivered
throughout 2023, building awareness and increasing
knowledge in various sustainability topics.
Employee engagement
Throughout 2022, colleague engagement at a divisional
level was measured - driving actions to improve our
performance where necessary. The goal is to move
to a more consistent approach across the group and
business-wide colleague surveys will be introduced in
2023, developing a deeper understanding of colleagues’
views, to learn from our successes and take actions
where we need to. Employee engagement KPIs will form
part of our People strategy moving forward.
Living wage
In 2022, 70% of UK THG staff (excluding contractors
and agency workers) were paid a Real Living Wage,
which is an hourly rate calculated according to the cost
of living in the UK by the Living Wage Foundation. In
2023, additional data will be collected regarding agency
and contractor staff, as well as staff outside the UK. We
will also build a roadmap to help achieve our target of
73
Our people
In 2022, we focused on developing our people and
reducing operational costs to future-proof the Group
and streamline our processes to benefit our global teams.
We developed our people through targeted training and
development programmes, focusing on digital skills, data
analysis, and leadership, all of which are critical for our
teams to succeed in today’s fast-paced environment.
We reduced costs by streamlining our processes
and optimising our people operations. This included
implementing new technology solutions such as
automation in our distribution centres which helped
us to reduce manual workloads and improve efficiency.
Supporting our people
Our goal is, and always will be, to foster a workplace culture
that prioritises our people, their personal wellbeing, and
their professional development.
To achieve this, our in-house doctor provides personalised
and virtual GP services for all THG employees globally and
delivers initiatives to support people who are struggling
with their mental health. Not only does this service give our
people access to free medical support and advice, but it
also helps us to create a culture of empathy and awareness.
Our Employee Assistance Programme (EAP) also supports
the wellbeing of our UK-based employees by providing
24/7 access to information, advice, and support.
In response to the cost-of-living crisis, we introduced free
lunches for all apprentices based on our catered sites
throughout November and December. Following positive
feedback from our apprentices and their managers, we
have extended this initiative until March 2023.
Finally, we awarded £36m of shares to 564 employees in
2022, reinforcing our meritocratic culture.
THG colleagues captured at ICON Studios. Q1 2023.
THG colleagues captured at ICON Studios. Q1 2023.
Culture
As THG evolves, we recognise that our employee value
proposition (EVP) must evolve too, and so last year, we
invited our global workforce to suggest a fifth company
value and help shape the future of THG. We received over
650 suggestions, all of which gave us a fantastic insight
into what makes THG so special, but the suggestion that
seemed to resonate with our teams regardless of role,
division, or location was “collaboration”.
Collaboration underpins everything we do at THG; it’s why
we’re a global leader that continues to challenge what is
possible. Over the next 12 months, we will be embedding
our newest value, collaboration, in everything we do whilst
continuing to bring our existing values, innovation, ambition,
decisiveness, and leadership, to life.
We will continue to develop our unique and vibrant culture,
tracking progress against employee feedback obtained
from group-wide surveys, pulse surveys, onboarding
surveys, and exit surveys, and HR data such as attrition
rate, absenteeism and employee referral rate. In 2023, we
will establish a baseline engagement score before working
towards our target of improving scores by at least 15% by
2025. To find out more about our sustainability goals and
targets, visit our Sustainability section.
Culture is a principal risk and the Board has overall
responsibility for risk management. However, as reflected in
its Terms of Reference, the Risk Committee has delegated
responsibility for the monitoring and review of the
processes and procedures in place to manage or mitigate
principal risks, including Culture.
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Annual Report 2022
Recruitment
Our talent team adapted to the demanding job market,
delivering a recruitment strategy that engaged both active
and passive candidates globally. A key part of our strategy
involved utilising our network of employees and industry
partners to identify and attract top talent. We also invested
in recruitment technology and tools to streamline the hiring
process and make it easier for top talent to apply and
connect with us.
We secured a listing in The Times Top 100 Graduate
Employers for a second consecutive year, reinforcing
our position as a top employer in the graduate market.
We proactively engaged with students from a variety of
educational backgrounds, resulting in over 250 graduate
and undergraduate hires from 56 universities.
C A S E S T U D Y
Meet Hannah
Early Careers Assistant at THG
Hannah joined THG in August after successfully
securing a place on Change 100, Leonard Cheshire’s
award-winning internship programme for university
students and recent graduates with a long-term
health condition and/or disability.
During her 3-month internship at THG, Hannah
shadowed our L&D team, designed training
sessions, delivered workshops, and attended
university events. She also worked with the other
interns we hired through Change 100 to create ‘The
Neurodivergent Forum’, a place for people across
the Group to find out more about neurodivergent
conditions, share ideas, and socialise.
After completing her internship, Hannah received an
offer to join THG as a permanent member of the
Early Careers team, supporting and developing our
grads, interns, and apprentices as they navigate the
transition from campus to office.
We asked Hannah what advice she would give to
someone completing a Change 100 placement.
We continued our commitment to creating an inclusive
and accessible hiring process that gives everyone an
opportunity to showcase their skills and talents, regardless
of their background or personal circumstances. This
involved delivering diversity and inclusion training to our
talent team and entering a partnership with Change 100,
an award-winning internship programme of paid summer
work placements and mentoring for disabled students
and recent graduates. Through Change 100, we have
developed our knowledge and understanding of accessible
recruitment, taking learnings from genuine experts and
applying them to our own processes.
“Invest in your personal development and say yes to
as much as possible, especially if it involves pushing
yourself out of your comfort zone. Being open-minded
is important in any role, but it’s definitely something to
prioritise when you’re an intern.
I’m so glad that I’ve been able to get involved in new
projects, make new connections, and really shape my
role into something I’m incredibly passionate about.
I can’t wait to see what the future holds for me at THG.”
Learning & development
From our early careers talent to our senior leaders, we’re
passionate about supporting and developing our people
at every stage of their career. In 2022, our Learning &
Development (L&D) team delivered a variety of initiatives
to enhance soft skills and technical expertise across the
Group. This training was supplemented by over 5,000
hours of self-led online learning, 2,336 LinkedIn Learning
course completions, and 76,737 LinkedIn Learning video
completions.
We delivered the latest iteration of our 12-month
development programme, supporting the personal and
professional development of our graduates, interns, and
apprentices as they navigated the transition from campus
to office. Underpinned by social learning, our 2022 early
careers development programme consisted of in-person
networking events, workshops, industry talks and online
learning, giving our early careers talent access to a variety
of learning opportunities to help them go further, faster.
THG Accelerator continues to go from strength to strength
with 47 graduates joining the programme in 2022. From
Computational Neuroscience with Cognitive Robotics to
Journalism & Communications, our Accelerator cohort
introduces a wealth of diversity, experience and knowledge
to our Technology division. To date, our Accelerator
programme has developed over 150 graduates in-house,
giving THG access to homegrown tech talent whilst
addressing the digital skills gap and making tech careers
more accessible.
Watch our THG Accelerator
In Focus video here
We launched our Leadership & Management Academy in
partnership with industry-leading training provider, Corndel.
Through the Academy, managers at all levels across the
UK were invited to apply for a place on our Level 3, Level 5
and Level 7 qualifications, all of which are accredited by the
Chartered Management Institute (CMI). Each qualification
blends coaching, training and personal development
that is tailored to our business and the individual learner,
giving our people a fantastic opportunity to develop the
knowledge, skills and behaviours needed to become a
transformational leader at THG. Our Level 7 programme,
delivered in partnership with Imperial College Business
School, gives our senior leaders access to world-class
learning opportunities and Imperial College Associate
Alumni status.
THG/Orbit, our award-winning global customer service
solution, also launched the Orbitor Programme to develop
their teams, encourage engagement, and recognise top
talent. The initiative has been embedded into THG/Orbit's
performance management process as team leaders use
the 4-point scale each month to help agents identify areas
for improvement, develop their skills, and celebrate their
success. This provides a structured and consistent measure
of performance based on quality and quantity of customer
responses, reinforcing THG's meritocratic culture.
Internal mobility
We know that giving our people an opportunity to grow
and develop with us is essential for having a productive,
passionate and efficient workforce. That’s why we’re
committed to promoting internal mobility and providing our
employees with opportunities to move between different
departments and roles. Not only does this benefit our
people as individuals, but it helps to create a more dynamic
and knowledgeable workforce.
One of the ways we support internal mobility is through
our professional development programmes as they give
our people the soft skills and technical knowledge that
they need to take on new roles and responsibilities. We
also have a strong culture of collaboration, evidenced by
the introduction of our new company value, which helps
employees to build relationships and gain exposure to
different areas of the Group.
In addition, we have a clear and transparent promotion
process that gives employees the chance to move up
within their current department or to switch to another
one that aligns better with their career goals. Our People
team works closely with managers to identify potential
opportunities and provide support and guidance to
employees throughout the process.
Ultimately, our focus on internal mobility helps to create
a more engaged and motivated workforce, as well as a
more resilient and adaptable business. By investing in our
employees and supporting their career growth, we can
attract and retain top talent whilst also creating a positive
and supportive work environment.
75
76
Annual Report 2022 Creating a diverse & inclusive workforce
We strongly believe that having a diverse workforce and an inclusive workplace creates a more innovative and successful
business. We’re proud to have a strong gender split across our workforce with 48% of our employees identifying as female
and 48% identifying as male (4% not disclosed), and we are continuing to improve data around the ethnicity
of our workforce. Please see below.
2022 Gender
2022 Ethnicity
Male
Female
Not Disclosed
Total
BAME
Non BAME
Not Disclosed
Total
Board
Senior
Leadership
7
18
1
6
Other
Total
3,937
3,979
3,962
3,986
0
0
340
340
8
24
Board
Senior
Leadership
8,256
Other
8,288
Total
0
2
941
943
2
11
3,752
3,765
6
11
3,563
3,580
8
24
8,256
8,288
In 2022, we launched our Diversity & Inclusion (D&I) strategy, implementing a range of initiatives built around our four
pillars: visibility and representation, learning and development, recruitment and progression and accessibility and inclusion.
To find out more about our progress to date, visit page 72.
Visibility
& Representation
Recognise and celebrate the success of
our diverse workforce and partnerships,
ensuring every employee feels
represented and heard.
Learning
& Development
Delivering effective and relevant D&I
training tailored to each and every
employee to further their education
or help them progress at THG.
Data
Optimisation
Minority
Representation
Educational
Training
Accessible
Content
Recruitment
& Progression
To hire diversity fairly, sourcing the best
talent regardless of background and
supporting our employees throughout
their journey at THG.
Accessibility
& Inclusion
Providing virtual and physical experiences,
opportunities and work environments
which are accessible to all.
Diverse
Recruitment
Progression
Support
Accessibility
Optimisation
Inclusive
Benefits
Social impact
Finally, we laid the foundations to deliver our Group Social
Impact strategy in 2023.
Our commitments within each pillar will allow us to tackle
complex social issues and create a bigger impact in our
local communities.
Underpinned by three key pillars, championing inclusion,
disrupting inequality and creating opportunity, our strategy
aims to address social issues in our communities and drive
positive change for our people and the things that matter
most to them.
These pillars determine which causes we focus on and
what activities we do both at Group-level and in division.
In 2023, we will work towards achieving our target of
allowing all THG employees to take 2-days volunteering
leave by 2025 and providing 10,000 people in the
community with technology and life skills training by 2023.
To find out more about our sustainability goals and targets,
visit the Sustainability section.
1.
Championing
inclusion
2.
Disrupting
inequality
3.
Creating
opportunities
We’re committed to championing
digital inclusion & disability
inclusion.
We’re committed to disrupting
housing inequality and health
inequality.
We’re committed to creating
opportunities through education
and employment.
Health and safety
Nothing is more important than the health and safety
of our people. We continue to make solid progress
strengthening and enhancing our workplace health
and safety arrangements which ensure our people
are safe and well at work. During 2022, we invested in
strengthening our Global Health and Safety support
team to ensure our business operations have access to
best-in-class competent Health, Safety and Environment
(HSE) support and advice to ensure we provide a safe
and healthy place work of work. In addition, our company
health and safety programme delivered:
•
Safety leadership refresher training for our Internal
Executive team
• Over 90 THG Managers successfully completed the
Institution of Occupational Safety and Health (IOSH)
Managing Safely training course
• New HSE Management Standards for the control
of contractors
During 2022, we have strengthened our focus on the
prevention of workplace accidents which includes the
robust reporting and investigation of workplace accidents.
Our group-wide Lost time accident frequency rate for 2022
was 0.121. Our plan for 2023, includes continually improving
our processes and procedures for the reporting and
investigation of accidents along with the effective sharing
and learning of accident causes and preventive measures
across the business.
In 2023, our focus will continue to make progress on
ensuring there are common HSE standards in place across
our high-risk activities and strengthen our arrangements for
the control of environmental risk and the mobilisation of our
new Occupational Health Provider.
Health & Safety is a principal risk and the Board has overall
responsibility for risk management. However, as reflected in
its Terms of Reference, the Risk Committee has delegated
responsibility for the monitoring and review of the
processes and procedures in place to manage or mitigate
principal risks, including Health & Safety.
77
1. Per 100,000 working hours.
78
Annual Report 2022
Task Force on
Climate-related Financial
Disclosures (TCFD)
The Company is required to disclose against the
recommendations of TCFD (as required by Listing Rule
(LR) LR 14.3.27R).
As stated in last year’s Annual Report, we have chosen
to adopt a phased approach to achieve full alignment
with TCFD recommendations as THG is progressing on
in its sustainability journey - launching the Group’s first
Sustainability Strategy, THG x Planet Earth, in late 2021.
We set out in the table below our responses to the TCFD
recommendations and recommended disclosures - all
disclosures are considered to be material. Although we are not
yet in position to align and report fully against all of the TCFD
recommended disclosures, we have provided the actions
taken so far and the next steps to enable full disclosure. In
the table below, we have summarised the Group’s ongoing
work programme, set against the core elements of the TCFD
reporting recommendations and guidelines:
Governance
Recommendation
Response
a) Describe the board’s oversight
of climate-related risks and
opportunities
The Board is scheduled to convene at least eight times a year but additional meetings typically take place to
ensure ongoing business needs are adequately addressed and monitored, including in respect of performance
and delivery of strategic objectives. Environment, social and governance (ESG) matters (including climate
change) arising from the Sustainability Committee are communicated and updated to the Board by the
Chair of the Sustainability Committee in person or virtually using minutes and summarised updates from the
Sustainability Committee meetings. For example our net zero science-based targets were communicated
to and approved by the Board – these targets will undergo validation by SBTi (the global body enabling
businesses to set emissions reduction targets in line with climate science) in 2023. The Sustainability
Committee meets at least three times annually and was established to ensure that the Group has appropriate
and effective strategies, policies and operational controls in place to conduct its business in a responsible and
sustainable manner and to ensure it is properly accountable in respect of sustainability targets. Key duties
include reviewing and monitoring the Group’s systems, strategies, policies and targets in relation to, amongst
other things, energy and carbon management, and climate change. Further details can be found
on pages 141-143.
The Board also has overall responsibility for risk management and establishing the Group’s risk appetite. It
monitors the risk environment and reviews the relevance and appropriateness of the principal risks to the
business. One of the principal risks is Climate Change, Environmental and Social Responsibility. The Risk
Committee supports the Board in setting the Group’s risk appetite and ensuring that processes are in place
to identify, manage and mitigate the Group’s principal and emerging risks. At each meeting, the Committee
reviews the principal risks and their associated appetite targets and metrics, to assess whether they continue
to be relevant, effective and aligned to the achievement of our strategic objectives, and within an acceptable
tolerance for the Group. At least four Risk Committee meetings take place annually. Further details on risk
management can be found on page 83.
b) Describe management’s role
in assessing and managing
climate-related risks and
opportunities
The Group’s Chief Sustainability Officer is accountable for the ongoing development, management and
implementation of THG x Planet Earth. In conjunction with the Board-constituted Sustainability Committee (of
which he is a member), the Chief Sustainability Officer oversees all Sustainability related matters (including
climate-related risks and opportunities) to ensure the Group has appropriate and effective strategies, policies
and operational controls in place to conduct its business in a responsible manner.
In 2022, the TCFD governance structure and process was established. This includes a cross functional
Working Group focusing on alignment with TCFD recommendations which meets at least fortnightly.
The Working Group feeds into the TCFD Steering Committee, consisting of senior representatives from
Sustainability, Finance, Procurement and Risk, which meets at least six times a year. The Steering Committee
ensures the Working Group’s progress on TCFD alignment and manages the overall direction of the
workstreams associated with TCFD. Outcomes from the TCFD Steering Committee are communicated to the
Sustainability Committee.
TCFD
Working
Group
TCFD
Steering
Committee
Sustainability
Committee
Board
Focus and actions for 2023 and beyond
We will communicate progress and outputs towards full TCFD alignment to the Board – including:
1) Outcome of climate-related risks and opportunities assessment.
2) Climate scenario modelling and analysis.
3) Progress against climate-related targets.
79
Key
Disclosure level:
Full
Partial
Omitted
80
Annual Report 2022
Strategy
Recommendation
Response
Risk management
Recommendation
Response
a) Describe the climate-related
risks and opportunities the
organisation has identified
over the short, medium, and
long-term
b) Describe the impact of climate-
related risks and opportunities
on the organisation’s businesses,
strategy, and financial planning
c) Describe the resilience of the
organisation’s strategy, taking
into consideration different
climate-related scenarios,
including a 2°C or lower
scenario
To achieve full implementation of the reporting recommendations of the TCFD over the course of the next few years,
one of the first steps we took in 2022 was the formation of the TCFD governance structure and process – details can be
found in the TCFD Governance Section. This allowed us to focus and pull together resources to conduct a ‘gap analysis’
to full TCFD alignment and create an action plan (summarised below in ‘Focus for 2023 and beyond’).
In 2021, as part of the Group’s work to develop the THG x Planet Earth Strategy, high level material ESG issues including
climate and GHG emissions were identified – details of our last materiality assessment can be found in our 2021 Annual
Report, pages 89-90. This year, we reviewed those issues alongside the ESG risks and opportunities and extracted the
climate-related risks and opportunities. Examples of the types of climate-related risks and opportunities that are now
being considered, and which will be further reviewed, defined and input into future climate scenario modelling and
analysis in 2023 are summarised below:
Transition risks
•
Policy and legal – Changes in climate-related regulations may affect carbon price,
carbon offset/credits and carbon tax.
Markets – Increase in carbon prices may impact cost of energy and other resources/materials.
Physical risks
•
Chronic/Acute – Acute and chronic weather events (e.g floods and storms) may disrupt supply chains and
operations, impacting prices of agricultural raw materials and commodities.
Opportunities
•
Products and services – Increase in demand for more sustainable product alternatives
and services such as THG Eco.
Markets – Investment thesis for low carbon transition grows as governments
and investors commit to a greener economy.
To understand the impacts of climate-related risks and opportunities as identified above, we must conduct climate-
related scenario modelling (using short, medium and long-term time periods which will be determined as part of the
overall climate scenario modelling project in 2023). Given the expertise and software required to undertake such an
exercise we must partner with external experts and therefore have not been able to undertake it this year but will plan
to do so for 2023 (as detailed in the section below). As our TCFD work progresses, we will consider the extent to which
these climate-related risks and opportunities are already taken into account within THG’s business strategy and financial
planning and how they may help to inform future decision making.
Focus and actions for 2023 and beyond
Further work on climate risks and opportunities, impacts and scenario analysis will be undertaken over the next few
years. Our progress and timeline is summarised below:
Phase 1 (2022) - Complete
•
TCFD Gap analysis – Identifying gaps in current processes, structure and programmes against TCFD
recommendations.
TCFD Action Plan – Identify the actions and resources required to achieve full alignment with TCFD
recommendations.
Climate-related risk and opportunities identification – Review and extract the climate-related risks and
opportunities from previous ESG materiality assessment.
Phase 2 (2023)
•
Climate risk and opportunities refinement and assessment – Refine, score/prioritise and input the climate-
related risks and opportunities.
Climate-related risk and opportunities modelling and impact analysis – Quantify the possible impacts of climate-
related risks and opportunities across three time horizons using at least two different climate-related scenarios.
Net zero roadmaps to be created for our Beauty and Nutrition divisions.
Phase 3 (2024+)
•
Climate risk and opportunities integration – Utilising and embedding the outputs of climate related risks and
opportunities into the wider business and divisions – including business strategy, financial planning and risk
management.
Working towards our GHG emissions reduction targets (which are awaiting SBTi validation in 2023)
using the net zero roadmaps for divisions.
•
•
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Key
Disclosure level:
Full
Partial
Omitted
a) Describe the organisation’s
processes for identifying and
assessing climate-related risks
b) Describe the organisation’s
processes for managing
climate-related risks
Climate-related risk is embedded in Climate Change, Environmental and Social Responsibility risk which is one of the
Group’s principal risks (see further detail on page 91). The Risk committee supports the Board in setting the Group’s risk
appetite and ensuring that processes are in place to identify, manage and mitigate the Group’s principal and emerging
risks. Current and emerging regulatory risks (such as TCFD and Extended Producer Responsibility (EPR)) are taken into
consideration when determining principal risks. At each meeting, the Committee reviews the principal risks and their
associated appetite, targets and metrics, to assess whether they continue to be relevant, effective and aligned to the
achievement of our strategic objectives, and within an acceptable tolerance for the Group.
The Sustainability team and others across the business including Legal and Property undertake a monthly review
of the Climate Change, Environmental and Social Responsibility risks. This process involves the identification and
assessment of various Climate Change, Environmental and Social Responsibility risks. Also, during the monthly reviews,
mitigation actions and workstreams for climate risks are monitored and high risk items are flagged to be raised in the
Risk Committee. The impacts (financial and non-financial) and likelihood of identified risks are scored on our Group Risk
scoring matrix which incorporates environmental and social impacts. Further information can be found in the
Risk Management section (pages 87-95).
In 2021, a high level ESG materiality assessment was undertaken (including climate change related risks identification
and prioritisation). The assessment took into account the likelihood and impact of such risks. Examples of the climate-
related risks and opportunities are summarised in the Strategy section above. We aim to expand and go into further
detail of the identified climate-related risks during 2023 as part of our climate scenario modelling workstream. As THG’s
climate-related risks and opportunities are reviewed and assessed further, we will enhance and refine the non-financial
(including climate) elements of the Group risk assessment process including the risk matrix.
c) Describe how processes for
identifying, assessing, and
managing climate-related risks are
integrated into the organisation’s
overall risk management
As part of monthly risk updates as described in the above section, the output feeds into the Group risk monthly update
meetings between the Chief Risk Officer and accountable risk leads from across the business. High risk items are
escalated to the Risk Committee (which meets quarterly) for comment and scrutiny (further detail can be found in the
Governance section, page 80).
Focus and actions for 2023 and beyond
The Group will be determining the short/medium/long-term time horizons for climate-related risks and opportunities,
with intent to align with existing THG frameworks so the significance of the climate risks and opportunities can be
determined in relation to other risks. This work will be undertaken as part of the climate scenario modelling exercise in
2023.
We will also look at updating the non-financial descriptors in the risk matrix after climate scenario modelling has been
undertaken to reflect factors and thresholds to be considered when assessing the severity of a risk (from a non-financial
impact perspective).
Metrics and targets
Recommendation
Response
a) Disclose the metrics used by
the organisation to assess climate
related risks and opportunities
in line with its strategy and risk
management process
b) Disclose Scope 1, Scope 2,
and, if appropriate, Scope 3
greenhouse gas (GHG)
emissions, and the related risks
c) Describe the targets used
by the organisation to manage
climate related risks and
opportunities and performance
against targets
In 2022, we developed our Science-based targets, which includes reduction targets for Scope 1, 2 and 3 emissions. The
targets were submitted to SBTi (Science Based Targets initiative) for validation in 2022 and are expected to be approved
and published in 2023.
GHG emissions (including intensity ratios) and energy metrics are currently calculated and disclosed in compliance with
SECR (Streamlined Energy and Carbon Reporting) – please see page 63 and our Basis of Reporting – GHG emissions
document. These are used to inform our THG x Planet Earth Strategy and various processes such as CAPEX planning.
Other climate-related metrics (e.g water and waste) will be determined and used more widely as we undertake climate
scenario modelling in 2023 and further align with TCFD recommendations.
THG calculates and discloses Scope 1 and 2 emissions (market and location-based), further information can be found on
page 63. In 2022, we also calculated our Scope 3 baseline emissions for 2020, details can be found on page 61. We will
continue to develop our approach to Scope 3 calculations in 2023 as part of our THG x Planet Earth Strategy and targets.
In late 2021, we launched THG x Planet Earth where we published our goal to be carbon positive by 2030. To achieve
this we have submitted Scope 1, 2 and 3 emissions reduction targets to SBTi for validation and will be published in
2023. In 2022, ESG metrics (including setting SBTi targets) were linked to executive remuneration, further details can be
found on page 147. In future years, specific emissions reduction targets will also be embedded into the ESG component
of executive remuneration after our science-based targets have been validated. We are also currently in the process of
developing an implementation plan for our divisions to achieve these targets. The methodology used to calculate our
Scope 1, Scope 2 emissions and energy use metrics can be found in our Basis of Reporting – GHG emissions document.
Focus and actions for 2023 and beyond
In 2022, we prioritised establishing the reporting processes and framework for capturing energy and emissions data.
We also undertook limited assurance on our Scope 1 and 2 emissions and associated energy use – details can be found
on page 63. In 2023, we will be expanding to other climate-related metrics such as water and waste as detailed in THG
x Planet Earth.
Furthermore, over the next few years we will be developing more specific intensity and efficiency ratios which
is part of the plan to reduce our emissions as per our SBTi targets and climate goals.
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Annual Report 2022
Risk management
and informed
decision making
THG’s Enterprise Risk Management (ERM) Framework
is designed to protect the interests of key stakeholders
and enhance the quality of decision making, enabling
the effective management of our strategic, operational,
commercial, compliance, change and emerging risks.
We continuously seek to embed and improve the use
and adoption of the THG ERM Framework, to ensure it is
integral to our day-to-day activities. This helps us to deliver
our strategic objectives and goals through risk-informed
decision making and the effective management of risk.
In 2022 we continued the maturing of our approach to risk
management, including a further refresh of our principal
risks, the embedding of divisional risk management
processes and the alignment of insurance within our risk
function, including the creation of THG Insurance Limited.
Figure 1 – ERM Framework
Assess /
Analyse
Monitor /
Track
Identify /
Understand
Respond /
Measure
Report /
Communicate
Risk appetite and risk tolerances
How we identify risks
Our risk appetite reflects our ability and desire to accept
a certain level of risk to achieve our strategy. We recognise
that eliminating risk is often not feasible or desirable, so
we use our group risk appetite statement, parameters and
metrics to support informed decisions on the level of risk
that can be taken or sought to achieve strategic objectives.
All identified risks are measured using the pre-determined
risk matrix set out in our Risk Management Policy.
Principal risks are monitored against risk appetite targets
using supporting measures, metrics, and tolerances,
which are evaluated throughout the year to ensure
they remain aligned with our strategic objectives,
and within an acceptable risk tolerance for the Group.
Our risk identification process follows an enterprise wide
“top-down, bottom-up” approach, which seeks to identify:
• principal risks that may impact our ability to and pace
by which we achieve our strategic objectives, with these
risks representing the risks that most threaten delivery
of our strategy; and
•
strategic, commercial, operational, compliance and
change risks (“business risks”) that occur at a divisional
level. These risks are those that pose the greatest threat
to the success of business activities across the Group
and may also feed into our principal risks.
How we assess risks
Risk governance
All identified risks are assessed for likelihood and impact
using a range of financial and non-financial criteria aligned
to the business and its respective divisions. The assessment
considers risk before any mitigations (inherent risk) and
after current mitigations (residual risk). The key benefit of
assessing inherent risk is to highlight potential risk exposure
in the event of control or mitigation failure.
How we manage risks
Eliminating risk is often not feasible or desirable, so we use
risk appetite to make informed decisions on the appropriate
level of risk that can be taken to support achievement of our
strategic objectives. Our overall risk appetite is approved
and measured by the Board.
All our principal risks are assigned to Executive Owners.
The Executive Owner is responsible for the overall
management of the risk, ensuring the adequacy of control
and the robustness of action plans to maintain the risk
within appetite. Principal and emerging risks are supported,
as appropriate, by in-depth reviews.
Business risks are identified and captured divisionally
and functionally, being owned and managed within their
respective management teams and reviewed on an
ongoing basis.
Risk reporting and monitoring
We continue to consider risks both individually and collectively
to fully understand our risk landscape. By analysing the
correlation between risks, we can identify those that have the
potential to cause, impact, or increase another risk and that
these are weighted appropriately. This exercise informs our
scenario analysis, particularly in scenarios used in the Viability
Statement, see pages 93-95.
THG operate a formal risk governance structure ensuring
risk management is at the forefront of decision making
and creating clear points of escalation.
Board
The Board has overall responsibility for risk management
and establishing the Group’s risk appetite. It monitors
the risk environment and reviews the relevance and
appropriateness of the principal risks to the business.
Risk Committee
The Risk Committee supports the Board in setting the
Group’s risk appetite and ensuring that processes are in
place to identify, manage and mitigate the Group’s principal
risks. At each meeting, the Committee reviews the principal
risks and their associated appetite targets and metrics,
to assess whether they continue to be relevant, effective
and aligned to the achievement of our strategic objectives,
and within an acceptable tolerance for the Group.
Further information on the Committee’s activity in 2022 is
set out in the Risk Committee Report on pages 130-132.
Audit Committee
The Audit Committee monitors the effectiveness of the
control environment through the review of Internal Audit
reports and other assurance activity from THG Internal
Audit and consideration of relevant reporting from
management and the external auditor.
Further information on the Committee’s activity in 2022
is set out in the Audit Committee Report on pages 123-129.
Executive
Business risks are consolidated and escalated in accordance
with our Risk Management Policy and via the ERM Framework
to the Risk Committee. This provides organisational visibility
to emerging, strategic, commercial, operational, financial and
compliance risks. The risks are considered in context of our
existing principal risks and to drive accountability and action.
The Executive is responsible for the stewardship of the
risk management approach. It develops the strategy and
oversees the delivery of the related operational plans that
help to manage the associated risks. Each principal risk
is also owned by a member of the Executive.
Principal risks are managed, mitigated and monitored against
risk appetite in line with our Risk Management Policy and
evaluated throughout the year to ensure they remain aligned
to our strategic objectives. They are continually reviewed by
our Risk Committee, who also consider the results of ‘in-depth’
testing of key controls supporting each principal risk.
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Annual Report 2022
Chief Risk Officer
The Chief Risk Officer (CRO) is responsible for the
second and third-line functions, namely THG Risk and
THG Internal Audit. The CRO is responsible for the
facilitation and implementation of the risk management
approach across THG, including the provision of
appropriate risk reporting for the Risk Committee, Audit
Committee and the Executive. The CRO attends the Risk
and Audit committee meetings and regularly meets with
respective Chairs outside these meetings. The CRO is also
responsible for insurance, business continuity, health and
safety, food safety, facilities, security and loss prevention.
Our three lines governance model defines clear roles
and responsibilities for all employees and establishes
accountability for actions and decisions. It also describes
how appropriate oversight, challenge and assurance are
provided over business activities, including the ethical
conduct of our operations.
The First Line represents all employees, giving them
responsibility for management of their risks and the
subsequent deployment of risk strategies, thus supporting
risk-based decision making. They hold the necessary
skills and knowledge to help with the identification and
management of risks within our business.
THG Risk
THG Risk supports the effective operation of the ERM
Framework and Governance Structure, including the
management of the principal risks and providing guidance,
support and challenge to the business to effectively
manage risk.
THG Internal Audit
The Second Line consists of THG Risk, who are responsible
for setting the framework, policies, tools and techniques
to enable the First Line to effectively manage risk. As part
of this role, THG Risk are on hand to provide support and
guidance to ensure a consistent approach to managing
risk is maintained. THG Risk also manages the corporate
insurance programme, ensuring that placements are
appropriate for the risk exposure and in line with our risk
appetite. The Board recognises that culture underpins the
effectiveness of THG’s risk management, and the operation
of an effective control environment.
THG Internal Audit is led by the Head of Internal Audit, and
its purpose and activities are set out in the Internal Audit
section of the Audit Committee Report on page 127.
The Third Line is THG Internal Audit, the main role
of which is to assess whether the first two lines are
operating effectively.
Figure 2 - Three Lines
Governance Model
Risk management
and internal controls
1st Line
All Employees
Own & operate
2nd Line
THG Risk
Guide, support and challenge
3rd Line
THG Internal Audit
Independent Assurance
The Board retains overall responsibility for setting group
risk appetite and for risk management and internal control
systems. In accordance with principles M, N and O of the
UK Corporate Governance Code 2018 (the “Code”), in
addition to Paragraph 58 of the FRC guidance (Section 6),
the Board is responsible for reviewing the effectiveness of
the risk management and internal control systems
and confirms that:
•
•
There is an ongoing process for identifying, evaluating
and managing the emerging risks faced by the
Company;
The systems have developed throughout the year under
review and up to the date of approval of the Annual
Report and Accounts;
• They are regularly reviewed by the Board; and
•
The systems accord with the FRC guidance on risk
management, internal control and related financial
and business reporting.
There were no instances of significant control failing
or weakness during the year.
Emerging risks
We define emerging risks as uncertainties arising from
trends that are on our radar, but whose full extent and
associated implications are not yet completely clear.
These types of risk continue to be identified through both
the Principal and Operational Risk processes. Additionally,
emerging risks are identified, prioritised and understood
via an ‘identify, filter and prioritise, and investigate and
understand’ approach. This approach utilises internal and
external sources, including business leaders and subject
matter experts, across a selection of categories to identify
potential emerging risks and opportunities.
By the very nature of emerging risks, it is common to
identify false leads, conflicting signals and messages.
Therefore, the approach filters and prioritises, to support
management in helping to decide which emerging risks
should be investigated further.
Once it has been decided which emerging risks should be
explored further, they are investigated and understood by
an allocated Emerging Risk Owner, working with THG Risk.
The work to understand emerging risks will vary depending
on the risk, but ranges from basic qualitative assessment
to modelling and quantitative assessment.
You can read more about our risk management and internal
control systems in our Strategic Report on pages 83-95
and the associated work of the Audit and Risk Committees
on pages 123-132.
A changing risk landscape
The current macroeconomic and geopolitical environment
has created a more challenging risk landscape for all
organisations. Our ERM Framework equips us to monitor,
understand and respond to external uncertainties and
events. The external risk landscape is reviewed regularly
to ensure we proactively respond to external events
with potentially material impacts.
The war in Ukraine heightened uncertainty for our
employees, customers and investors. In response, we
rapidly evaluated the risks, determined potential impacts
to our business and made changes to our business
operations and supporting processes. We also used
our existing cyber security capability to strengthen our
resilience against potential cyber threats. Through our
risk governance channels we continue to monitor the
possible wider effects of the conflict.
We also considered our wider approach to resilience
and business continuity planning, with a focus on
preparedness for energy supply issues, and any potential
impact on employees, business operations and customers.
Whilst the Covid-19 pandemic has stabilised, we continue
to monitor its long-term effects through the principal risk
process, together with the impact of the war in Ukraine,
energy supply issues and rising interest rates and their
combined impact on increasing the potential risk of
recession in key markets. Throughout 2022, the global
pandemic continued to produce challenging conditions
across many sectors of the global economy. THG’s priority
has been, and remains, to protect the health, safety and
wellbeing of our employees.
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Annual Report 2022
Principal risks
The Board and the Risk Committee carry out a robust and
ongoing assessment of the principal and emerging risks
facing the Group throughout the year. The assessment
considers those risks that would threaten THG’s business
model, future performance, solvency or liquidity, and
ensures that the risks continue to align with our business
strategy. The effective management of strategic, financial,
compliance and operational risks is critical to the success of
THG’s strategy. THG continually assesses its principal risks
to ensure continued and enhanced alignment.
In reviewing the principal risks, we have split ‘Regulatory
Compliance’ into ‘Health and Safety’, ‘Product Quality and
Safety’ and ‘Legal and Regulatory Compliance’ to better
reflect the complexities of our regulatory landscape and
the key risks that may impact our strategy. In addition,
our ‘Infrastructure’ and ‘Onboarding and Integration’ risks
have been merged to reflect the focus on exploiting our
significant investment over the past two years, alongside
additional focus on supply chain to become ‘Infrastructure
and Supply Chain’. Our ‘Environment, Social and
Governance’ risk has been refocussed as ‘Climate Change,
Environmental and Social Responsibility’, better reflecting
our continued commitment to the wider community and
the progression of our Sustainability Strategy.
The continued maturing of our risk management approach
has seen the removal of ‘Corporate Structure’ given the
successful restructuring of the business during 2022 and
the addition of 3 new principal risks: ‘Geopolitical and
Economic Uncertainty’ reflecting the current changing
risk climate; ‘Liquidity and Funding’, to reflect external
stakeholder focus on e-commerce funding and liquidity;
and ‘Strategic Optionality’, reflecting the importance of
making optimal strategic decisions to continually transform
our portfolio of businesses.
We manage principal risk in line with our risk management
policy and approach, as set out in risk management on
pages 83-86. In 2022, we monitored and reported on 15
principal risks. As detailed in the following table, a range of
measures are in place, or are being deployed or developed,
to manage and mitigate our principal risks.
Risk heat map
1
4
6
9
11
2
15
7
5
8
10
14
13
12
3
Key
1. Cyber Security & Data Privacy
2. Third Party Reliance
3. Talent
4. Ingenuity e-commerce Platform
5. Customer Needs
6. Infrastructure and Supply Chain
7. Innovation
8. Legal and Regulatory Compliance
9. Product Quality and Safety
10. Health and Safety
11. Climate Change, Environmental
and Social Responsibility
12. Geopolitical and Economic Uncertainty
13. Culture
14. Liquidity and Funding
15. Strategic optionality
Likelihood / Frequency over 36 months
Principal Risk
Risk context
Management and mitigation
Cyber Security
and Data Privacy
Failure to responsibly collect,
process and store data, together
with not ensuring an appropriate
standard of cyber security across
the business, will result in us not
meeting our regulatory obligations,
and losing the trust of our
stakeholders.
Link to strategic priority
Information is the life blood of
a digital company – protecting
the confidentiality, integrity and
accessibility of this data is critical
for a data-driven business. Failure to
do so can have significant financial
and regulatory consequences in the
General Data Protection Regulation
(GDPR) era. In addition, we also
need to use our data efficiently
and effectively to drive improved
business performance.
Executive Owner(s):
Chief Technology Officer,
General Counsel
Direction of Travel -
Third-Party Reliance
Failure to embed our partners as
an integral and aligned part of our
infrastructure, fulfilment and go-to-
market strategy in a timely manner,
will result in us failing to deliver the
right capabilities and experiences
to our customers.
Link to strategic priority
THG places reliance on third-party
providers to support the delivery
of our services to our customers.
Any interruption in these services
or relationships could have
a profound impact on THG’s
reputation in the market and
could result in significant financial
liabilities and losses.
Executive Owner(s):
Group Procurement Director
Direction of Travel -
Key
Group strategic priorities
•
•
•
•
•
•
•
•
•
•
•
•
•
The Chief Information Security Officer oversees information
security. The Global Privacy Officer oversees information
protection.
Multi-year cyber security programmes driving continuous
improvement and cyber risk reduction across technology,
business processes and culture.
Continuously improving data protection strategy, framework
and methodology, ongoing data mapping and impact
assessment procedures.
Formally-deployed information security risk management
methodology to provide objective reviews and monitoring
of our assets and systems.
All colleagues are required to undertake awareness training
for information management and data protection, with a focus
on the GDPR requirements.
Internal and external validation of compliance through auditing,
including risk-based audits of suppliers and other third parties
(see ‘Third-Party Reliance’).
All new suppliers go through a rigorous selection and
onboarding process.
Procurement team monitors supplier performance on an
ongoing basis, against third-party contract service-level
agreements.
Dual sourcing for most supply categories and in all business
units, reducing dependencies on sole suppliers.
Ongoing development of global site standards and monitoring
to ensure adequate standards are maintained in the supply
chain as far as possible, applicable both in-house and with
third-party sites.
Assurance on our key third-party suppliers and service
providers through Internal and external compliance auditing.
Business Continuity strategies include an assessment of
potential third-party impacts.
Increasing our supply chain capacity by building new additional
fulfilment centres globally, with less reliance on third-party
warehouses (see ‘Infrastructure and Supply Chain’).
Build category leadership
positions in beauty, health
and wellness.
To make Ingenuity the
partner of choice for
commerce transformation
and sustainability solutions.
Deliver engaging content
and innovative products to
our global customer base.
Accelerate growth in core
international territories,
leveraging our local
infrastructure.
Drive positive change with
our stakeholders, through
an entrepreneurial,
values-led culture.
Direction of travel
Increasing
Decreasing
Stable
New Risk
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Annual Report 2022
Principal Risk
Risk context
Management and mitigation
Principal Risk
Risk context
Management and mitigation
Talent
If we fail to attract at pace, and/or
retain employees with the critical
skills, capabilities, motivation and
capacity we need to deliver on our
strategy, we will not be successful.
Link to strategic priority
Executive Owner(s):
Chief People Officer
Direction of Travel -
Ingenuity e-commerce
platform
Failure to maintain a reliable,
scalable and secure live services
environment, will impact our
ability to deliver the consistent and
resilient experience expected by
our customers.
Link to strategic priority
Executive Owner(s):
Chief Technology Officer,
Chief Executive Officer - Ingenuity
Direction of Travel -
As we continue to evolve our
priorities, the capacity, knowledge
and leadership skills we need will
continue to change. THG will not
only need to attract the talent
and experience required to help
navigate this change. We will also
need to provide an environment
where employees can develop
to meet these new expectations;
an environment where everyone
can perform at their very best. By
continuing to empower employees
and leaders to make decisions, be
innovative, and be bold in delivering
on our commitments, THG will
continue to create an attractive
working environment, increasing
employee engagement and aligned
high-performing teams.
As a digital company, we continue
to focus on scaling our current and
future Ingenuity platform services
environment in an agile and speedy
manner to ensure the delivery
of a consistent and robust cloud
platform and associated digital
network. THG must provide the
right infrastructure and operations
for all our customer products, a
hosting platform, together with
the governance to ensure optimal
service availability, performance,
security protection and restoration
(if required).
Customer Needs
If we fail to anticipate, understand
and deliver against the capabilities
and experiences our current and
future customers need in a timely
manner, they will find alternative
providers.
Link to strategic priority
Executive Owner(s):
Chief Marketing Officer,
Chief Experience Officer
Direction of Travel -
As THG continues to grow
its business and brand,
an understanding of how
to continually attract customers
whilst retaining our existing
customers is essential. This requires
a deep and continuous flow of
insights supported by processes
and systems. By understanding the
needs of our customers, THG will
continue to differentiate itself from
competitors, build compelling value
propositions and offers, leverage
key drivers to identify opportunities,
decrease churn and drive more
effective revenue generation.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Reviews of our remuneration requirements and mechanisms
designed to incentivise and drive the right behaviour with a
focus on ensuring fair and equitable pay across the business.
Focused development of key staff, through dedicated learning
and development tools, to ensure they create the environment
which enables colleagues to thrive and perform at their very
best.
The above, monitored via engagement surveys, follow-ups
and our performance management processes.
Ongoing investment in our Ingenuity platform services
to ensure the THG estate evolves to support the business
as it scales and changes.
Continuous enhancement of our data protection strategy,
framework and methodology, ongoing data mapping and
impact assessment procedures.
Robust change management processes and incident
management protocols adhered to for all products and services.
Service-level objectives including uptime, responsiveness,
and mean time to repair objectives.
Comprehensive disaster recovery and business continuity
plans in place across the Group.
Other key mitigation factors detailed under “Cyber Security
and Data Privacy” risk.
Utilisation of customer activity and churn data, to understand
their appetite for product offerings.
Continuous Net Promoter Score (NPS) surveying allows THG
to identify customer challenges rapidly, and respond in a timely
manner to emerging trends.
Developments in e-commerce trends are monitored to keep
abreast of the latest developments and innovations.
Use of technology and data to be more targeted and strategic
in how we gain new customers and maximise the loyalty and
lifetime value of existing customers.
Managed International Customer Service - 24/7 Customer
Service for a global audience across live chat, calls, email
and social.
Highly-competent buyers and merchandisers are adept
at interpreting and acquiring desirable brands.
Customer service levels and complaints are monitored,
and internet sites are reviewed for customer opinion.
Investment in logistics, fulfilment, delivery, marketing, brand
and customer experience to keep our customer appeal.
Infrastructure and
Supply Chain
If we fail to scale our infrastructure,
systems and wider supply chain
at pace, whilst maintaining service
levels, it will impact our ability to
meet demand, attract customers
and support territorial expansion.
Link to strategic priority
World-class infrastructure and
supply chain from source to
customer is fundamental to the
exacting service levels that we
seek to provide to businesses and
customers alike. Our infrastructure
must be robust, slick and secure
and ensure the THG service
offering is second to none. The risk
is compounded by demands for
incremental functionality and the
need to deploy this across a larger
footprint.
Executive Owner(s):
Chief Operating Officer
Direction of Travel -
Innovation
If we fail to identify and leverage
emerging technologies and
invest in modern practices and
supporting tools, methods and
infrastructure in a timely manner,
we will not meet the needs of
our customers or our commercial
goals.
Link to strategic priority
We must be able to rapidly
deploy new innovations to
our infrastructure, systems
and customers by introducing
technologies, services, or new
ways of working. Innovation
requires us to address how we
drive change and transformation
across our employees, processes
and technology, and how we
differentiate and drive excellence
and efficiencies.
We continue to operate in a global
market with numerous legal and
regulatory requirements. Remaining
aware of changing regulation and
ensuring compliance is key to
ensuring we protect both THG
and our customers and partners.
Executive Owner(s):
Chief Operating Officer
Direction of Travel -
Legal and Regulatory
Compliance
Failure to anticipate, understand
and implement our legal and
regulatory requirements, will
result in us failing to meet our
obligations, impacting our ability to
deliver our strategy and losing the
trust of our stakeholders.
Link to strategic priority
Executive Owner(s):
General Counsel
Direction of Travel -
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Operational Excellence team delivering strategic programmes
to ensure all aspects of the THG estate achieve operational
excellence, seamless integration, conform to a unified standard
and evolve to support the business as it scales and changes.
Capex Committee oversees THG’s Capital Projects team to
support and monitor transformation programmes, including
management of programme risks and dependencies.
THG Risk are involved in these steering groups to ensure
the cross-functional execution of infrastructure projects are
successful and reduce the risk that projects do not deliver their
desired outcomes on time or fail to maximise the expected
benefits.
Comprehensive disaster recovery and business continuity plans
in place across the Group.
Continuous monitoring of supply chain activity and news
through advanced web-scraping functionality.
Continuous monitoring and forecasting of demand and
availability to adjust intake accordingly.
Multiple delivery methods, routes, ports and carrier strategies to
minimise the risk of disruptions.
Extensive and up-to-date knowledge of supplier base to ensure
we can scale our supply chain appropriately and at pace.
Strategic investments, alliances and partnerships
in our fulfilment infrastructure, such as the Autostore.
A fully vertically integrated business model, with full control over
new product development, branding and design capabilities,
which significantly reduces development timelines.
Collaboration with partners to complement and enable
accelerated innovation.
Innovation informed through demand insights, consumer data
and feedback from our global retail customer base.
Compliance teams with reporting lines into Chief Risk Officer
and Deputy General Counsel.
Defined Risk Appetite metrics and Key Risk Indicators
which are monitored and updated at each Risk Committee.
Emerging risk processes, including horizon scanning,
to anticipate potential changes in the legal and regulatory
landscape.
Legal and regulatory compliance reviews are an embedded
part of the annual assurance plans delivered by our 3rd line
of defence.
See “Cyber Security and Data Privacy” for related regulatory
compliance mitigations.
89
90
Annual Report 2022
Principal Risk
Risk context
Management and mitigation
Principal Risk
Risk context
Management and mitigation
Ensuring the ongoing quality and
safety of our product portfolio
is vital for our brands and our
reputation.
The quality and safety of the
products within our portfolio are
at risk of becoming compromised
at any stage in the supply chain if
we fail to adequately monitor the
associated processes.
Product Safety
and Quality
Failure to manufacture and
provide safe, compliant and
quality products to our consumers,
may prevent them making
informed purchasing decisions,
compromise their safety and
result in us failing to meet our
obligations, negatively impacting
our brand and reputation.
Link to strategic priority
Executive Owner(s):
Chief Operating Officer
Direction of Travel -
Health and Safety
Failure to implement and
monitor appropriate policies
and procedures and support
a continually improving safety
culture across all parts of the
business could lead to accidents
or incidents resulting in loss
of life or serious injury.
Link to strategic priority
Executive Owner(s):
Chief Operating Officer
Direction of Travel -
Health and safety is of paramount
importance and THG must
provide a safe environment
for all stakeholders.
Failure to implement and monitor
stringent health and safety
procedures and policies across all
parts of the business could lead to
accidents or site-related incidents
resulting in loss of life or serious
injury to employees, subcontractors,
visitors, customers or members
of the public.
Our global footprint and evolving
infrastructure further compound
this risk.
Climate Change,
Environmental
and Social
Responsibility
Failure to achieve our sustainability
related aims, objectives and
obligations, will impact our ability
to deliver our Sustainability
Strategy and result in us failing to
meet our regulatory obligations
and public commitments, losing
the trust of our stakeholders.
Link to strategic priority
We are committed to investing in
our people, partners, technology
and communities to give individuals,
businesses, and our planet the
opportunity to thrive. Our vision is
to act as a force for good in leaving
the world a better place than we
found it.
If we do not act on climate change,
associated governmental actions
and energy transition could disrupt
our operations and increase our
costs.
Executive Owner(s):
Group Commercial Director
Direction of Travel -
91
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Product safety and quality is embedded in our processes
and controls, from product design to customer.
Rigorous testing and regularly monitoring performance
indicators that drive improvement activities.
External certification and auditing of key suppliers.
Regular monitoring and quality controls over material received
to ensure that THG product safety and quality standards
are met.
Activation of incident management teams in the event of an
incident relating to the safety of our consumers or the quality
of our products
.
Oversight from our extensive team of product quality, regulatory
compliance and technical experts across each of the markets in
which we operate.
Clear, effective and regular communications of all relevant
safety updates.
Regular and documented training.
Ongoing updates to our risk assessments and safe systems
of work by trained and competent staff to raise awareness and
knowledge.
Experienced and competent health and safety professionals
to guide, challenge and support.
Ongoing monitoring of culture and regular reviews of
compliance against relevant safety regulations, policies
and procedures.
Oversight by the Board and regular review of safety reports
and safety performance.
Sustainability is integral to the group ethos with a team, headed
at an Executive level, to focus on creating more sustainable
products and supply-chain operations and reduce environmental
impact.
Multiple workstreams designed to respond to specific risks
and opportunities as part of our Sustainability Strategy.
Sustainability data and reporting platform which allow us to
comply with regulations and measure performance against
targets.
Governance structures, such as the internal TCFD (Task Force
on Climate-Related Financial Disclosures) Steering Committee
and working group, ensure there is adequate and regular
oversight, with additional independent oversight via
the Sustainability Committee.
A series of sustainability training modules are being rolled
out to all employees. In addition, all new starters undertake
sustainability inductions as part of their onboarding.
Oversight from our team of sustainability experts.
External third-party assurance of our operational energy
and emissions data.
Geopolitical and
Economic Uncertainty
Failure to anticipate, understand
and successfully respond to changes
in geopolitical and economic
uncertainly on a timely basis, may
impact our ability to meet our strategy.
Link to strategic priority
Adverse changes to economic
conditions could affect one or more
countries and result in reduced
customer spending, higher interest
rates, adverse inflation in our cost
base, adverse FX movements and
limited debt refinancing options.
All the above could negatively
impact our operating cashflows.
The development of a shared
behavioural competency that
encourages employees to always
do the right thing, put customers
at the heart of the business and
drive innovation, is critical in THG’s
success. Devolution of decision
making, and the acceptance of
accountability for decisions, is
fundamental to our continued
development and to sustain
our shared Values and Behaviours.
THG also supports a culture of
empowered leaders that develops
ideas and solutions, and provides
employees with a safe environment
allowing for honest disclosures and
discussions. Such a trusting and
empowering environment can help
sustain innovation, enhance customer
success and drive the engagement
that results in increased market share.
Our ability to generate and manage
our cash, control expenditure and
other expenses underpins our ability
to repay debt and fund working
capital investment.
Executive Owner(s):
Chief Financial Officer
Direction of Travel -
Culture
If we do not fully empower our
employees and enable accountability
in line with our shared values and
behaviours, we will be challenged
to create a culture that meets THG’s
business ambitions.
Link to strategic priority
Executive Owner(s):
Chief People Officer
Direction of Travel -
Liquidity and Funding
Failure to adequately manage our
cash, debt and overall liquidity and
funding requirements over the
short, medium and long-term, could
negatively impact our ability to deliver
our strategy.
Link to strategic priority
Executive Owner(s):
Chief Financial Officer
Direction of Travel -
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Diverse product portfolio and geographic reach which mitigates
our exposure to any localised risks and uncertainties.
Adaptable portfolio of existing products and an ability to develop
new products that suit consumers’ and customers’ changing
needs when economic conditions change.
An ability to respond to the inflationary pressures on both inputs
and product pricing.
Currency and interest rate hedging arrangements in line with
the Group’s Treasury Policy.
Regular reforecasting of business results and cash flows,
and rebalancing of investment priorities where necessary.
Financial resilience and liquidity with significant cash on hand
at year-end and our undrawn revolving credit facilities.
Integration of Values and Behaviours into all our core colleague
priorities including objectives, performance management,
appraisals, talent attraction, selection and development,
leadership development and onboarding.
Establishment of a Diversity & Inclusion (D&I) Committee,
a platform to further improve the employee journey and
workplace culture to ensure we are a truly inclusive workplace.
Training including anti-bribery and corruption training which
continues to be delivered across our business units based on
assessed risk.
Whistleblowing and incident reporting mechanisms in place to
allow issues to be formally reported, investigated and monitored.
Employee engagement surveys & follow ups.
KPIs and People Dashboards at a divisional level, including D&I
metrics and attrition analysis.
Treasury operations are managed and monitored in line
with a Board-approved Treasury Policy.
Maintenance of cash reserves and equivalents, together
with access to undrawn, revolving credit facilities.
Close monitoring and stress testing of projected cash, debt
capacity and overall liquidity, including sensitivity analysis,
to assess the impact of the changing economic environment.
Through our Profit Improvement and Capex Committees, there is
ongoing scrutiny and challenge of discretionary expenditure and
capital spend.
Broader working capital management to continually improve
cash flow and reduce reliance on bank facilities.
Frequent engagement and dialogue with the market and
rating agencies.
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Annual Report 2022
Principal Risk
Risk context
Management and mitigation
Strategic optionality
Failure to make the optimal
strategic decisions and transform
our portfolio of businesses
accordingly, may limit our ability to
maximise returns and value for our
shareholders.
Link to strategic priority
As part of the continued maturing
of our business and to support
our ongoing growth and strategic
aims, we must continue to utilise
our corporate structure in a way
which maximises returns and value
creation for our shareholders. We
must also ensure that our corporate
structure continues to evolve to
support the strategic decisions we
may choose to make in future.
•
•
•
•
Opportunities to optimise and streamline our portfolio
are continuously monitored.
Opportunities to generate and realise value from
our assets are assessed on an ongoing basis.
Acquisition and disposal activity is driven by a portfolio
strategy with a clear, defined evaluation process.
Resources are prioritised towards the areas of our portfolio
and markets that have the greatest potential.
Executive Owner(s):
Group Commercial Director
Direction of Travel -
Going concern statement
As a result of the analysis performed, including potential severe
but plausible scenarios, the Board believes that the Group is
able to adequately manage its financing and principal risks
and that the Group will be able to operate within the level of
its facilities and meet the required covenants for the going
concern assessment period. Based on the above activity, the
Directors are satisfied that it is appropriate to prepare the
financial statements of the Group on a going concern basis.
Viability statement
The Directors have voluntarily adopted the UK Corporate
Governance Code, in which the Directors are required to
issue a Viability Statement declaring whether they believe
the Group is able to continue to operate and meet its
liabilities for the three year period to December 2025, taking
into account its current position and principal risks. The
Directors assessed the prospects of the Group by reference
to its current financial position, its recent and historical
financial performance, its forecasts for future performance,
its business model (pages 13-20), strategy (pages 11-12)
and its principal risks and mitigating factors (pages 87-93).
In addition, the Board regularly reviews the financial
position of the Group, its liquidity and financial forecasts.
Assessment of the
going concern assumption
The overall financial performance of the business has remained
robust with a strong liquidity position maintained throughout
the year. In addition, as at the balance sheet date, the Group
had a total of £170 million in an undrawn Revolving credit
facility (“RCF”) due to mature in December 2024, along with
£473 million readily available cash held on the balance sheet.
Net debt at this date was £516 million (31 December 2021: net
cash £305 million), with net debt of £181 million (31 December
2021: net cash £44 million) before the inclusion of IFRS 16 lease
liabilities that mature over a period of up to 25 years.
The Group holds a €600 million seven-year loan facility
agreement due to mature in December 2026 and during the
year an incremental £156 million banking facility was provided
by the Group’s existing lenders ranking pari passu with the
existing facility. This new facility expires in October 2025. While
there are no financial covenants attached to the €600 million or
£156 million loan facilities, the covenants attached to the RCF
are linked to gross debt leverage, and become effective when
the facility is drawn upon. This covenant requires the Group to
maintain the ratio of gross debt over adjusted EBITDA to below
7.60, which is reviewed regularly, although as noted the facility
is not drawn down. This facility is not forecast to be drawn in
the future period.
The going concern assessment period is the twelve months
from the date of this report to 30 April 2024.
In order to satisfy the going concern assumption, the Directors
of the Group review its Budget periodically, which is revisited
and revised as appropriate in response to evolving market
conditions. The Directors have considered the Budget and
forecast prepared through to 30 April 2024.
Refer to the Viability statement for further information
on the stress test scenarios that have been applied
to the Group’s forecast.
93
Viability assessment period
In considering the viability of the Group, the Directors
felt that an appropriate period of time was the three-year
period between 31 December 2022 to December 2025 over
which to assess the Group’s prospects. This is consistent
with Group’s business model and strategic planning period
approved by the Board. A roll forward from the three year
assessment period is performed for the purposes
of impairment.
The Group has applied financial modelling to the
assessment of going concern and viability to assess
the base case and apply stress testing.
The base case
The Group’s strategic planning cycle includes an annual
Budget process, which is reviewed by the Board. This
planning process involves modelling under a series of
assumptions. Severe but plausible downside scenarios were
also modelled setting out impacts of a combination of the
principal risks, as well as a reverse stress test to identify what
would be required to either breach covenants or run out of
liquidity. This process is led by the Group CFO, Commercial
Director and Deputy Group CFO along with the Board and
Chair and CEO providing further direction to align strategic
initiatives. Following the completion of the separation of the
business units in the year, more detailed granular information
has also been available which has supported decision
making on strategic initiatives. Forecasts have been prepared
on a divisional level. The Directors of the Group review
its Budget periodically, which is revisited and revised as
appropriate in response to evolving market conditions.
In considering the Group’s financial position the Directors
have considered:
•
•
Expected future growth of trading businesses;
The committed and expected pipeline
of its Ingenuity business;
• Margins expected to be achieved in the future; and
• Wider market and industry specific factors.
ranking pari passu with the existing facility. This new facility
expires in October 2025. There are no key covenants attached
to the €600m or £156m loan facilities which are drawn down,
but the covenants attached to the RCF are linked to gross
debt leverage and become effective when the facility
is drawn upon. This facility is not currently drawn down,
and not forecast to be drawn in the future period.
Stress tests
Several stress test scenarios have been applied
to the Group’s forecast, including but not limited to:
• Nutrition gross profit margin remains at historic
lows seen in FY22 for a further prolonged period;
•
•
Beauty revenue declines by 10%;
Below budgeted contract wins in Ingenuity
Commerce of 25%; and
•
A decline in the cash flow conversion rate of 10%.
Any mitigating actions available to protect working capital
and strengthen the Group balance sheet, including
deferring non-essential capex and increased cost control,
such as reducing stock levels, new customer marketing
investment and investment in the platform. A severe but
plausible downside modelled the impact of all five scenarios
above occurring simultaneously.
Further, the Directors have assessed two key metrics to
ensure that the Group has the ability to continue to trade,
alongside complying with its current banking facilities.
•
•
Cash headroom: The Group’s forecast shows material
cash headroom, that management are confident give
the Group the ability to continue to trade and capitalise
on market opportunities as they develop; and
Leverage (defined as gross debt / adjusted EBITDA).
If the Group was to draw upon its currently undrawn
RCF, it would be required to maintain a leverage ratio
of less than 7.60 times. The forecasts reviewed suggest
that while the facility is not required, if it were there
would be enough headroom to satisfy this covenant.
The Directors have also considered the liquidity of the
Group as well as available facilities and note that as at
the balance sheet date, the Group had a total of £170m in
undrawn facilities, along with £473m readily available cash
held on the balance sheet. Net debt at this date was £516m
(note 18) and net debt of £181m before the inclusion of IFRS
16 lease liabilities.
The Director’s note that while the wider global economy
is suffering as a result of high inflation and various global
recessions, the Group has a number of mitigating actions
available to it to provide suitable cash headroom in the
event of a declining sales and depressed margin scenario
as noted above, including but not limited to deferring
non-essential capex, along with certain cost control actions.
In December 2019, the Group entered into a €600m seven
year loan facility agreement due to mature in December 2026
and a £170m Revolving Credit Facility (“RCF”) due to mature in
December 2024. During the year an incremental £156 million
banking facility was provided by the Groups existing lenders
94
Annual Report 2022
Reverse stress test
Assessment of viability
A reverse stress test was modelled to identify the point
at which liquidity is exhausted. The model would have to
see a significant decline in revenue and margins compared
with the stress test set out above. Such a scenario, and the
sequence of events which could lead to it, is considered
to be extremely remote. Whilst the occurrence of one
or more of the principal risks has the potential to affect
future performance, none of them are considered likely
either individually or collectively to give rise to a trading
deterioration of the magnitude indicated by the reverse
stress testing and to threaten the viability of the Group
over the three-year assessment period.
In making the Viability Statement, the Board,
supported by the Audit and Risk Committees,
carried out a robust assessment of the Group’s
viability, principal risks and uncertainties facing
THG for the next three years, as described on
pages 87-93, which could impact the
business model taking into account:
Factor
Link to principal risks
Stress test scenarios involving a depression in margin,
a below revenue performance within Ingenuity Commerce
and Beauty, along with a decline in cash conversion has
been run together to show an unlikely but plausible worst
case scenario including an assessment of the Group’s
longer-term prospects. We anticipate that these scenarios
would include any further uncertainties that may come from
the impact of the current macroeconomic climate (including
the impact of the Russian invasion of Ukraine) with high
inflation and various global recessions.
Note associated potential impacts were considered
within the following principal risks review: Cyber
Security & Data Privacy; Third Party Reliance;
Talent; Infrastructure and Supply Chain; Ingenuity
E-Commerce Platform; Customer Needs; Innovation;
Legal and Regulatory Compliance; Liquidity and
Funding, Geopolitical and Economic Uncertainty,
Strategic Optionality, Culture; and Climate Change,
Environmental and Social Responsibility.
The worst case scenario outlined above did not include any
mitigating actions available. There are a number of actions
that management would take to protect working capital
and strengthen the balance sheet if any of the scenarios
outlined above were encountered. These include deferring
non-essential capex and increased cost control.
Based upon the assessment of the sensitivity built into
the scenarios tested, the Directors confirm that they have
a reasonable expectation that the Group will be able to
continue in operation to meet its liabilities as they fall
due over the three-year assessment period.
95
96
Annual Report 2022 Directors' Report
Directors’ Report disclosures
The Directors present their report, together with
the audited consolidated financial statements of the
Company, for the financial year ended 31 December
2022. In accordance with section 414C(11) of the
Companies Act, the Company has chosen to provide
disclosures and information in relation to a number
of matters which are covered elsewhere in this
Annual Report. These matters, together with those
required under The Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment)
Regulations 2013, are cross-referenced in the table
below and together form part of this Directors’ Report.
The Governance Report, contained on pages 105-122,
is incorporated by reference into this Directors’ Report.
Information
Section in the Annual Report
Page(s)
Risk management (including principal and emerging risks)
Strategic Report
Pages 83-95
Going concern statement
Post balance sheet events
Strategic Report
Directors’ Report
Future developments of the Company
Strategic Report
Page 93
Page 104
Throughout the
Strategic Report
Pages 3-104
Greenhouse gas emissions
Strategic Report
Pages 59-64
Directors’ biographies
Governance Report
Pages 108-110
Corporate governance arrangements
Governance Report
Pages 105-122
Directors’ conflicts of interest
Governance Report
Page 120
Related Party Transactions
Financial Statements
Pages 213-215
Statement of engagement with employees
Strategic Report
Statement of engagement with suppliers, customers and
others in a business relationship with the Company
Strategic Report
Pages 47-54
Pages 47-54
Articles of Association
Annual General Meeting
In accordance with the Companies Act, the Articles of
Association may only be amended by special resolution
at a general meeting of Shareholders. The Articles of
Association are available on the Company's website at:
https://www.thg.com/investor-relations/
key-governance-documents.
The AGM will be held at The Bowdon Rooms,
The Firs, Bowdon, Altrincham WA14 2TQ on 21
June 2023 at 1:00 p.m.. The Notice of Meeting,
together with explanatory notes, will be sent
to Shareholders on or around the time of this
Annual Report.
Directors
Share capital
Biographies of those Directors who served during the 2022
reporting period and who were in office at 31 December
2022, and remain in office as at the date of this Directors’
Report, are contained in the Governance Report on
pages 108-110. All of these Directors held office throughout
2022 with the exception of Charles Allen, who was
appointed on 22 March 2022, and Gillian Kent and Dean
Moore, who were both appointed on 15 September 2022.
Further, on 24 January 2023 NED Damian Sanders was
appointed to the role of CFO and John Gallemore, the
incumbent CFO, was appointed to the role of COO.
All Directors will offer themselves for election or re-election
(as appropriate) by Shareholders at the AGM.
Subject to the Companies Act and the Articles of
Association, but without prejudice to the rights attached
to any existing Share, any Share may be issued with,
or have attached to it, such rights or restrictions as the
Company may decide by ordinary resolution or, if no
such resolution is in effect, as the Board may decide so
far as the resolution does not make specific provision.
No such resolution is currently in effect. No Share will,
without the prior written consent of the holder of the
Special Share, have attached to it (either at the time
of its creation or at any subsequent time) any rights in
respect of voting which are not identical in all respects
with those attached to the Ordinary Shares, D1 Shares,
D2 Shares, E Shares, F Shares, G Shares and H Shares.
Directors’ interests
Details of Directors’ beneficial and non-beneficial
interests in the Shares are detailed in the Directors’
Remuneration Report on page 151. No share awards
were granted to Executive Directors under the
Company’s share schemes during the 2022
reporting period.
Qualifying third party indemnification
and insurance
Pursuant to the Articles of Association and their
service contracts/letters of appointment (as appropriate),
Directors benefited from qualifying third party indemnity
provisions for the purposes of section 236 of the
Companies Act throughout the 2022 reporting period
and up to the date of this Directors' Report. The Company
also maintained Directors' and Officers' Liability
Insurance throughout the 2022 reporting period.
Appointment and replacement of Directors
The rules for appointing and replacing Directors are set out
in the Articles of Association. Directors can be appointed
by the Board or by ordinary resolution of the Company.
A Director can be removed from office by the Company
passing an ordinary resolution or by notice being given
by all other Directors.
Powers of the Directors
The Directors may exercise all the powers of the
Company subject to the provisions of the relevant
legislation, the Articles of Association and any directions
given by the Company in a general meeting.
Purchase of own Ordinary Shares
At the 2022 AGM the Company was granted authority by its
Shareholders to purchase up to 10% of its ordinary issued
share capital, in accordance with the Articles of Association.
No Shares were bought back under this authority during
the 2022 reporting period or in the period from 1 January
2023 to the date of this Directors’ Report. This buyback
authority will expire at the conclusion of the AGM, when
the Directors intend to propose the authority be renewed.
Allotment of Shares
Under the Companies Act, the Directors may only allot Shares
if authorised to do so by Shareholders in a general meeting.
The Directors were granted authority by Shareholders
to allot securities in the Company up to an aggregate
nominal amount of £2,291,231.67 and to allot securities,
without the application of pre-emption rights, up to
a nominal amount of £343,684.75 and a further £343,684.75
in connection with an acquisition or other capital
investment of a kind contemplated by the Statement
of Principles on Disapplying Pre-Emption Rights.
These authorities apply until the conclusion of the AGM
when the Company will seek Shareholder approval to
renew them, with detailed explanatory notes included
within the Notice of Meeting.
97
98
Annual Report 2022 Share structure
The Company has a Standard Listing on the London Stock Exchange and is the holding company of the Group.
The Company has ten share classes, as set out in the table below, and as at 31 December 2022 the Shares in issue
were as follows:
Share class
Number of Shares
Percentage of Company's fully
diluted issued share capital
Allotted, called up and fully paid Ordinary Shares
1,265,377,243
Allotted, issued and partly paid D1 Shares
Allotted, called up and fully paid D2 Shares
Allotted, issued and partly paid E Shares
Allotted, issued and partly paid F Shares
Allotted, issued and partly paid G Shares
Allotted, issued and partly paid H Shares
Allotted, called up and fully paid Special Share
Allotted, issued and fully paid Deferred 1 Shares
Allotted, issued and partly paid Deferred 2 Shares
Total
56,082,651
17,741
48,995,797
27,122,287
17,494,614
0
1
313,257
21,563,860
1,436,967,451
88.06
3.90
n/a
3.41
1.89
1.22
n/a
n/a
0.02
1.50
100
Rights and obligations attaching to Shares
The rights attaching to the Shares, as detailed within
the Articles of Association, are set out below.
Except as set out above and as permitted under applicable
statutes, there are no limitations on the voting rights of
holders of a given percentage, number of votes or deadlines
for exercising voting rights.
(a)
Ordinary Shares
(b)
Special Share
The Ordinary Shares rank pari passu in all respects and
carry the right to receive all dividends and distributions
declared, made or paid on, or in respect of, the Ordinary
Shares.
Subject to the rights of the Special Share and subject to
disenfranchisement in the event of non-payment of any call
or other amount due and payable in respect of any Share
or non-compliance with any statutory notice requiring
disclosure of the beneficial ownership of any Share, on a
show of hands every Shareholder present in person or by
proxy has one vote and on a poll every Shareholder present
in person or by proxy has one vote for every Ordinary Share
that they hold.
Electronic and paper proxy appointments and voting
instructions must be received no later than 48 hours
(excluding any part of a day that is not a working day)
before a general meeting.
The Special Share is (save as noted below) a non-voting
share that carries no economic rights.
Immediately on a Change of Control (as defined in the
Articles of Association) of the Company, the Special Share
will automatically carry such number of votes on any
resolution put to Shareholders as is necessary to ensure the
effective passing or defeat of that resolution.
The rights attributable to the Special Share will cease on
the earlier of: (i) 16 September 2023 (being the date falling
three years after the date of Admission); (ii) the transfer (in
whatever manner) of the Special Share to any person other
than pursuant to article 69.7 of the Articles of Association
(as explained below); and (iii) if a person who has become
the holder of the Special Share in the event of the holder's
death ceases to qualify as a Permitted Transferee (as
defined in the Articles of Association). In the case of (i), (ii)
and (iii), the Company may purchase or cancel the Special
Share at any time or otherwise deal with the Special Share
as permitted by the Companies Act.
(e)
Deferred 1 Shares and Deferred 2 Shares
The Deferred 1 Shares and Deferred 2 Shares are non-
voting ordinary shares and do not carry the right to
participate in dividends of the Company.
The Deferred 1 Shares and Deferred 2 Shares may be
purchased by the Company, provided it is lawful for the
Company to purchase them, for an aggregate sum of £1.00.
Restrictions on transfer or holdings
of securities in the Company
With the exception of the following, there are no restrictions
on the transfer of, or limitations on holding, securities
in the Company:
•
•
•
The Company may, pursuant to the Articles of
Association and the Companies Act, send out
statutory notices to those it knows, or has reasonable
cause to believe, have an interest in its Shares, asking
for details of those who have an interest in a particular
holding of Shares and the extent of their interest.
When a person receives a statutory notice and fails
to provide any information required by the notice in
the time specified within it, the Company can apply
to a court for an order directing, amongst other things,
that any transfer of the Shares which are the subject
of the statutory notice is void.
The Directors may, without giving any reason,
refuse to register the transfer of any certificated
Ordinary Shares which are not fully paid.
Transfers of uncertificated Ordinary Shares must
be carried out using CREST, the central securities
depository for markets in the UK and for Irish
stocks, and the operator of the relevant system
or the Directors can refuse to register a transfer
of an uncertificated Ordinary Share, in accordance
with the regulations governing the operation of
CREST.
•
The Special Share is subject to transfer restrictions
as set out at paragraph (b) above.
Pursuant to article 69.7 of the Articles of Association,
the Special Share will retain its rights on a transfer by
transmission upon the death of its holder to a Permitted
Transferee, being any person that is not: (i) an employee
of the Company or Director or any subsidiary undertaking
of the Company; or (ii) a person acting in concert with
any person listed in (i) at the time of transfer of the Special
Share. Similarly, in the event that the transmittee is not the
holder's intended beneficiary, a transmittee who produces
evidence of entitlement to the Special Share to the Board
may choose to have the Special Share transferred to
another person who is the intended beneficiary of the
holder's estate, so long as that person is also a Permitted
Transferee.
The holder of the Special Share is Matthew Moulding,
the Chief Executive Officer.
As at 31 December 2022 Matthew Moulding was also
interested in 198,744,095 Ordinary Shares, representing
15.71% of the total issued Ordinary Shares; 50,550,450 D1
Shares, representing 90.14% of the total issued D1 Shares;
360 D2 Shares, representing 2.03% of the total issued D2
shares; 43,641,266 E Shares, representing 89.07% of the
total issued E Shares; 20,197,808 F Shares, representing
74.47% of the total issued F Shares; 7,733,792 G Shares,
representing 44.21% of the total issued G Shares; and
18,346,774 Deferred 2 Shares, representing 85.08%
of the total issued Deferred 2 Shares.
(c)
D1 Shares, D2 Shares and E Shares
The D1 Shares, D2 Shares and E Shares are non-voting
ordinary shares and do not carry the right to participate
in dividends of the Company.
The holders of D1 Shares, D2 Shares and E Shares may
convert their D1 Shares, D2 Shares and E Shares into
Ordinary Shares (on the basis of, as applicable, one
Ordinary Share per D1 Share or E Share or 185 Ordinary
Shares per D2 Share).
(d)
F Shares, G Shares and H Shares
The F Shares, G Shares and H Shares are non-voting
ordinary shares and do not carry the right to participate
in dividends of the Company.
The holders of F Shares, G Shares and H Shares may
exercise put options to convert their F Shares, G Shares
and H Shares into Ordinary Shares (on the basis of,
as applicable, one Ordinary Share per F Share, G Share
or H Share). The put options may be exercised for
a period of 10 years from the end of the performance
period (which ended on 31 December 2022).
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100
Annual Report 2022
Dividends
Return of capital
Subject to the Companies Act and the Articles of
Association, the Company may, by ordinary resolution,
declare dividends and the Directors may decide to pay
interim dividends. A dividend must not be declared unless
the Directors have made a recommendation as to its
amount. Such a dividend must not exceed the amount
recommended by the Directors and no dividend may be
declared or paid unless it is in accordance with members'
respective rights.
No dividends were declared, nor will be distributed,
for the financial year ended 31 December 2022 (2021: £nil).
A liquidator may, on obtaining any sanction required by law,
divide amongst the members in kind the whole or any part of
the assets of the Company and may, for that purpose, value
any assets and determine how the division is carried out as
between the members or different classes of members.
Shares held on trust
The Company has established an employee benefit trust
(“EBT”) to hold Ordinary Shares to satisfy awards made under
the Employee Incentive Plan. At the date of this Directors’
Report the EBT currently holds 77,762,418 Ordinary Shares.
Substantial shareholdings
Disclosable interests of 3% or more in Ordinary Shares as at 31 December 2022 and 31 March 2023 were as follows:
Shareholder
Matthew Moulding
Sofina Capital S.A.
Balderton Capital (UK) LLP
Qatar Investment Authority
THG PLC EBT
Percentage of Ordinary
Shares as at 31 December
2022
Percentage of Ordinary
Shares as at 31 March
2023
15.71
9.13
7.66
7.52
3.47
15.30
8.89
7.46
7.32
5.90
All notifications made to the Company under the DTRs are released to the market via a Regulatory Information Service
and made available on the Company’s website at: https://www.thg.com/investor-relations/regulatory-news/.
Change of control
Other than the terms of the agreement between
Matthew Moulding and the Company, as detailed
under the Significant contractual arrangements
disclosure which follows, there are no agreements
between THG and its Directors or employees providing
for compensation for loss of office or employment
(whether through resignation, purported redundancy
or otherwise) by reason of a takeover bid.
Details concerning the impact on annual bonus in the event
of a change of control are set out in the Remuneration
Policy. Generally, any annual bonus awards and unvested
LTIP awards would be pro-rated for time and performance
in the event of a change of control whereas any deferred
elements of bonus would not be. While the Remuneration
Committee has the discretion not to pro-rate for time,
its normal policy is to do so. The Remuneration
Committee’s discretion not to pro-rate would only
be used if there was an acknowledged business case
which would be fully explained to Shareholders.
The Company has entered into various agreements
with third parties, as well as contracts with third-
party service providers, which provide such
parties with a right to terminate their agreement
in the event of a change of control.
Significant contractual
arrangements
The Company is party to a relationship agreement
with Matthew Moulding which regulates the ongoing
relationship between the two parties (the “Relationship
Agreement”). The principal purpose of the Relationship
Agreement is to ensure that the Company is capable
of carrying on its business independently of Matthew
Moulding and that all transactions and arrangements
between the Company and Matthew Moulding are
conducted on normal commercial terms. The provisions
of the Relationship Agreement imposing certain obligations
on Matthew Moulding will remain in full force and effect,
in respect of Matthew Moulding, for so long as: (i) the
rights of the Special Share remain in force; and/or (ii) either
Matthew Moulding beneficially owns, together with any
of his associates, at least (a) 5% of the fully diluted share
capital of the Company or (b) 10% of the Ordinary Shares.
THG Intermediate Opco Limited and THG Operations
Holdings Limited are parties to: (i) a senior facilities
agreement (Term Loan B, December 2019); and (ii)
a £156m facilities agreement (October 2022), both
of which are subject to mandatory prepayment
provisions on a change of control or the sale of all,
or substantially all, of the assets of THG Operations
Holdings Limited and its restricted subsidiaries.
Other than as disclosed above, there are
no significant agreements to which the Company
is a party that take effect, alter or terminate upon
a change of control following a takeover bid.
The Company does not have any agreement with any
Director or employee that would provide compensation
for loss of office or employment resulting from a
change of control on a takeover, except that the terms
of the Company’s share schemes and plans may
provide for the vesting of employee options and/
or awards in the circumstances of a takeover.
Donations
During the 2022 reporting period the Group made several
charitable donations totalling £0.4m (2021: £1.3m). THG did
not make any political donations during 2022 (2021: £nil).
Overseas branches
Whilst the Group does not operate any overseas branches,
subsidiaries have been established in the following
countries: Australia, China, France, Germany, Guernsey,
India, Japan, Jersey, the Netherlands, Poland, Portugal, the
Republic of Ireland, Singapore, Spain, Sweden, Ukraine,
the United Arab Emirates and the United States of America.
As a Group we continue to assess the ongoing situation in
Ukraine and Russia, with our key focus being to safeguard
our employees. Arrangements were put in place to
support the immediate relocation of employees where
required, together with the development of longer-term
resettlement proposals and the provision of appropriate
financial support. Welfare calls were extended to all
Group employees who have ties to the affected regions
and additional targeted monitoring groups have been
established to actively review intelligence on an ongoing
basis to ensure the Group continues to adapt accordingly.
From an operational perspective, all THG own-brand
deliveries have been temporarily suspended across
Russia and Ukraine and the Group continues to work
with its courier partners as the situation develops.
Necessary actions have also been implemented
internally to ensure continued compliance with all
applicable sanctions and related notices and guidance.
Research and development
THG and its third-party commerce clients are all
powered by THG Ingenuity, the Group’s proprietary
technology platform. In addition to providing end-to-end
e-commerce functionality, THG Ingenuity provides the
Group with several important competitive advantages.
Specifically, the commercial teams review real-time
transactional and customer insight data which informs
trading decisions that are then executed within short
time frames. In order to remain competitive and to
promote innovation, investment into THG Ingenuity from
a People and capex perspective is a key Group priority.
101
102
Annual Report 2022
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s and the Group’s transactions and disclose
with reasonable accuracy at any time the financial position
of the Company and the Group and enable them to ensure
that the Company and the Group financial statements
comply with the Companies Act.
The Directors are also responsible for safeguarding the
assets of the Group and parent company and thus for
taking reasonable steps for the prevention and detection
of fraud and other irregularities.
In accordance with DTR 4.1.12R, each Director whose name
and position appears on pages 108-110 of the Governance
Report confirms that, to the best of their knowledge:
•
•
•
the consolidated financial statements, prepared in
accordance with UK-adopted IFRS, give a true and
fair view of the assets, liabilities, financial position
and profit of the parent company and undertakings
included in the consolidation taken as a whole;
the Annual Report, including the Strategic Report,
includes a fair review of the development and
performance of the business and the position
of the Company and undertakings included
in the consolidation taken as a whole, together
with a description of the principal risks and
uncertainties that they face; and
they consider the Annual Report, taken as a whole,
to be fair, balanced and understandable, providing the
information necessary for Shareholders to assess the
Company’s position, performance, business model
and strategy.
Outlook and market demand
The Board anticipates FY 2023 Group revenue growth
across continuing divisions of low to mid-single digit.
Adjusted EBITDA is expected to be in line with the
company consensus, with a significant weighting to
the second half of the year.
The profitability and cashflow improvements during the
first quarter support the expectation for significant margin
recovery through the year. The decision to discontinue
non-core categories, coupled with ongoing deflation in
whey commodity prices and business model efficiencies
driving improved operating leverage, underpins the margin
confidence for FY 2023.
Audit and External Auditor
At the date of approval of this Directors’ Report each
Director confirms that:
•
•
to the best of their knowledge, there is no relevant
audit information that has not been brought to the
attention of the External Auditor; and
they have taken all steps required of them to make
themselves aware of any relevant audit information
and to establish that the External Auditor was aware
of that information.
This confirmation is given and should be interpreted
in accordance with the provisions of section 418 of the
Companies Act.
EY has indicated its willingness to continue in office as
External Auditor and, upon the recommendation of the
Audit Committee, a resolution to reappoint EY as such will
be proposed at the AGM. Any remuneration received by EY
for: (i) auditing this Annual Report; and (ii) any other (non-
audit) services has been disclosed in note 5 to the Group’s
financial statements.
Approval of Directors’ Report
This Directors’ Report was approved and issued
by the Board and signed on its behalf by
James Pochin
General Counsel and Company Secretary
17 April 2023
by the expected return to historical margins within THG
Beauty and THG Nutrition. THG Ingenuity adjusted EBITDA
margin will scale over time as the revenue mix evolves and
all service lines are sold either individually or as a complete
solution, with management targeting an aspirational 5-year
margin of c.7.5%.
Our focus over the last few years has been on investment
as we scaled our infrastructure to meet the step change
in demand during the pandemic. Whilst we continue to
selectively scale the business, it is clear that we can begin
to enjoy the benefits of past investment from a cash and
profitability perspective. Capital expenditure for the Group
is therefore expected to be up to £135m in FY 2023 (FY
2022: £176m), and in the range of £130m to £140m in FY
2024, remaining between 5.5% to 6.5% of revenue over
the medium-term.
Margin accretion, reduced capital expenditure and cash
adjusting items (c.£15m in FY 2023, a 65% reduction on FY
2022) and working capital rationalisation all support a clear
path to being free cash flow neutral in FY 2023, turning
positive in FY 2024.
Post balance sheet events
At the year end, certain loss-making categories and
territories primarily within THG OnDemand were placed
under strategic review. Post year end, and following
completion of the strategic review (further details on which
are included in the “Section 172 Statement Stakeholder
Engagement” section), the Board approved the exit from
THG OnDemand. In Q4, the Board approved the exit of
ProBikeKit. These operations will be fully exited throughout
the course of 2023. The optimal exit route remains under
review. The result of this decision has led to an inventory
provision totalling £25.5m, other costs of £6.9m and
impairment of £3.8m which have been recognised within
cost of sales and administrative expenses respectively and
included within Adjusted Items (note 4). This has been
concluded as an adjusting post balance sheet event.
On 28 February 2023, the sale completed in respect of one of
the non-core freehold assets recorded within the assets held
for sale category (note 12.2). The sale generated cash proceeds
of £5m which reflected the carrying value of the asset.
No other post balance sheet events have occurred.
Directors’ Statement
of Responsibility
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable UK law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have elected to prepare the Group financial
statements in accordance with UK-adopted IFRS and the
parent company financial statements in accordance with
UK Generally Accepted Accounting Practice (UK Accounting
Standards and applicable law), including Financial Reporting
Standard 101 Reduced Disclosure Framework (“FRS 101”).
Under company law the Directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group
and the Company and of the profit or loss of the Group
and the Company for that period.
In preparing these financial statements, the Directors
are required to:
select suitable accounting policies in accordance with
IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors and then apply them consistently;
make judgements and accounting estimates that are
reasonable and prudent;
present information, including accounting policies,
in a manner that provides relevant, reliable, comparable
and understandable information;
provide additional disclosures when compliance with
the specific requirements in IFRS (and in respect of
the parent company financial statements FRS 101) is
insufficient to enable users to understand the impact
of particular transactions, other events and conditions
on the financial position and financial performance
of the Group and Company;
in respect of the Group financial statements, state
whether UK-adopted IFRS have been followed, subject
to any material departures disclosed and explained in
the financial statements;
in respect of the parent company financial statements,
state whether applicable UK Accounting Standards,
including FRS 101, have been followed, subject to any
material departures disclosed and explained in the
financial statements; and
•
•
•
•
•
•
•
103
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company and /or the Group will continue in business.
These factors provide operational leverage for the Group
to rebuild towards historical adjusted EBITDA margins
of around 9.0% over the medium-term. This is supported
104
Annual Report 2022
The year ahead
It is anticipated that the search for suitable independent
NEDs will continue throughout 2023 and, more generally,
the structure, size and composition of the Board will remain
subject to ongoing oversight (with specific reference to
its collective balance of skills, knowledge, experience and
diversity) to ensure membership is fit for purpose and the
Group’s leadership needs are satisfied.
Further, and as noted at the outset of this Annual Report,
the intention remains to seek a Premium Listing, with timing
subject to the outcome of the FCA’s ongoing review vis-a-
vis reform of the current listing regime. Until the outcome
of this review is known, we will continue to review and
make further improvements to our corporate governance
arrangements to ensure the Group’s governance
framework is suitably mature and robust and we are
well-placed to make the step-up at the appropriate time.
We once again look forward to welcoming and
meeting with investors at the forthcoming AGM,
details of which are contained in the Notice of Meeting.
We consider this a key opportunity to engage with
our Shareholders and a suitable forum within which
ongoing and constructive dialogue can take place.
Charles Allen, Lord Allen of Kensington CBE
Independent Chair
17 April 2023
Governance Report
Dear Shareholders
I have pleasure in introducing this year’s Governance Report, the third since Admission,
which details the key governance items considered and changes implemented during
2022 (and to the date of this Governance Report). Whilst application of the Code is only
mandatory for companies with a Premium Listing, the Company chose to report against
it following Admission to reinforce its commitment to establish a robust governance
framework that supports the successful delivery of its strategic aims and objectives.
Throughout the 2022 reporting period the Group’s governance standards and infrastructure
remained subject to ongoing review to ensure they continued to evolve, as appropriate,
for an organisation of the size, nature and stage of development of THG.
Code compliance
As you will note from the Corporate Governance Statement
which follows, the Company complied in full with the Code
during the 2022 reporting period with the exception of
three departures, one of which has been rectified since my
appointment to the Board in March 2022. This improved
Code adherence evidences the Company’s desire to further
enhance its governance practices and it is anticipated
that the remaining two Code departures will, in time,
also be rectified following the appointment of additional
independent NEDs (further details on which follow).
Board and Board Committee
composition
The Board recognises the importance of strong corporate
governance to underpin the long-term, sustainable
prospects of the Group and considers that a fundamental
component of this is securing a suitably skilled and
experienced leadership team to oversee and guide
THG through the next stage of its governance journey.
Accordingly, a principal focus of the Nomination Committee
during 2022 was to enhance Board composition through
the appointment of suitable independent NEDs and, in
this regard, we were pleased to welcome Gillian Kent and
Dean Moore to the Board in September 2022. Additionally,
following a review of THG’s leadership needs and the
balance of skills, knowledge and experience on the Board,
we announced two changes to the Executive Leadership
Team at the beginning of 2023 – namely, the appointment
of Damian Sanders, former independent NED, to CFO and
the appointment of John Gallemore, the incumbent CFO, to
COO. Further information on these appointments, together
with details on the other Board changes which took place
during 2022, can be found within this Governance Report
and the Nomination Committee Report on pages 133-137.
Board Committee composition was also a key focus of
the Nomination Committee during 2022 to ensure that
membership remained appropriate in light of the various
Board changes which took place throughout the year. These
changes are detailed within the respective Board Committee
Reports on pages 123-157, together with current Board
Committee composition. Notably, in stepping down as an
independent NED Damian Sanders simultaneously stepped
down from certain Board Committees, including as Audit
Committee Chair and as a member of the Risk Committee.
As the Board currently comprises only two independent
NEDs, Gillian Kent and Dean Moore (excluding the Chair),
this has resulted in the non-satisfaction of the membership
requirements of these Board Committees since the date of
Damian Sanders’ appointment as an Executive Director. This
position is temporary and expected only to continue until the
appointment of at least one new independent NED in the
coming months.
105
106
Annual Report 2022
Corporate Governance Statement
Board of Directors
Upon Admission the Company elected to report against the Code. Whilst this is not mandatory for a company with
a Standard Listing, the Company recognises the value of effective and robust corporate governance in its continued
growth and development and in generating sustainable value creation for its Shareholders. Aside from the following
departures, the Company complied in full with the Code during the 2022 reporting period:
Provision 9 and Provision 19:
(Departure rectified on 22 March 2022)
Having been appointed as CEO upon the Company’s
incorporation in 2008 and serving as Company chair from
2019 until the appointment of the Independent Chair in
March 2022, Matthew Moulding’s dual role resulted in a
departure from Code Provisions 9 and 19 during this period
(and, in the current context, from 1 January 2022 until 21
March 2022). As detailed in the 2021 Annual Report, the
need to demonstrate the clear division of responsibilities
between the leadership of the Board and the executive
leadership of the business (with respect to, for example,
appropriate levels of challenge and independence) had
previously been subject to detailed consideration but
at the same time the Nomination Committee remained
cognisant of its core responsibility to ensure that the
Company’s leadership needs were satisfied to oversee the
effective delivery and execution of the Group’s strategic
aims and objectives. Indeed, the analysis undertaken
recognised the instrumental role which Matthew Moulding’s
entrepreneurial and dynamic leadership had played
in the Group’s expansion and evolution into a global
e-commerce technology group, together with the risks
associated with the wrong appointment being made.
Nevertheless, a review of the Group’s corporate governance
arrangements was undertaken during the 2021 reporting
period which subsequently identified the need for an
independent chair and, in turn, align the Company with
the relevant Code Provisions. Following a comprehensive
recruitment process (further details on which are contained
in the Nomination Committee Report on pages 133-137),
Charles Allen was appointed to the Board as Independent
Chair on 22 March 2022, at which point the Company’s
departure from Code Provisions 9 and 19 was rectified.
Provision 11:
Excluding the Independent Chair from the calculation (as
required by the Code), three of the seven Directors were
deemed to be independent at the end of the 2022 reporting
period, thus representing a departure from Code Provision
11. Following the appointment of Damian Sanders as an
Executive Director on 24 January 2023, two of the eight
Directors are considered independent as at the date of this
Governance Report.
As detailed within this Governance Report, and as noted
in the Nomination Committee Report on pages 133-137,
the Nomination Committee (and the Board more generally)
107
remains mindful of this departure and, with particular
regard to the Independent Chair’s mandate to, amongst
other things, improve independence and diversity, hopes
to rectify it during 2023 as a matter of priority. The structure,
size and composition (including diversity) of the Board
will remain under ongoing review, with due regard being
given to the balance of Executive Directors/NEDs, overall
independence and the need for appropriate succession
planning to be undertaken.
Provision 32:
As detailed within the “Board independence” section of
this Governance Report, Iain McDonald is not deemed to
be independent with reference to the tenure provisions of
the Code. However, during the 2022 reporting period Iain
McDonald was a member of the Remuneration Committee
(and remains so at the date of this Governance Report),
despite the Code recommendation that a company’s
remuneration committee should comprise only
independent NEDs.
The Board has considered the risks associated with this
Code departure and whilst, as stated in the 2021 Annual
Report, it recognises the need for independent membership
of the Remuneration Committee to demonstrate
objective oversight of, and independent challenge to, the
remuneration of Executive Directors, it remains of the
opinion that, at the present time and in the particular
circumstances of THG, it would not be in the best interests
of the Company and its Shareholders for Iain McDonald
to step down from the Remuneration Committee. Whilst
his independence may be deemed to be impaired under
the Code, the Board nonetheless considers that Iain
McDonald’s broad remuneration experience and extensive
financial expertise and investment acumen make him well-
equipped to serve on the Remuneration Committee and
enhance its overall balance of knowledge and skillsets.
Membership of the Remuneration Committee has been
carefully reviewed and, as detailed within the Remuneration
Committee Report on pages 144-157, various membership
changes took place during 2022 (and at the beginning
of 2023) to reflect changes in Board composition. It is
anticipated that the Company will continue to depart from
Code Provision 32 in respect of Iain McDonald’s continued
membership of the Remuneration Committee for the time
being, albeit the matter will be kept under ongoing review
with regard to, for example, the timing and independence
of future Board appointees.
Charles Allen,
Lord Allen of Kensington CBE
Matthew Moulding
Independent Non-Executive Chair
Date of appointment: 22 March 2022
Executive Director & CEO
Date of appointment: 24 June 2008
Matthew has been instrumental in THG’s growth,
leading its evolution from an entertainment reseller to a
global e-commerce technology group. Prior to founding
THG, he served an eight-year term as chief financial
officer of 20:20 Mobile (the Distribution Division of the
Caudwell Group) before leading its sale to private equity
for £365 million.
Matthew studied Industrial Economics at the University
of Nottingham before qualifying as a Chartered
Accountant with Arthur Andersen in 1998. His deep
e-commerce knowledge and insight, combined with his
proven entrepreneurial skills, make him best-placed to
most effectively drive THG’s strategy whilst working in
alignment with its Shareholder base.
Current external roles
None
Charles has extensive corporate experience across a
number of sectors, including finance, media, hospitality and
retail. Having played a key role in the creation of ITV, he is
recognised for his significant contribution to the television
industry. Charles is currently chair of Global Media &
Entertainment Limited, Balfour Beatty plc and the Invictus
Games Foundation and also advisory chair of Moelis &
Company. He is a former chair of Granada Media plc, chief
executive of Granada Group plc and ITV plc and chair of EMI
Music, Endemol and The British Red Cross. Charles has also
served on the boards of Tesco plc, Virgin Media and GET
AS and been Chief Adviser to the Home Office and a Senior
Adviser to Goldman Sachs.
Charles was vice chair of the London 2012 bid company,
non-executive director of the London Organising Committee
of the Olympic and Paralympic Games and chair of the
2002 Manchester Commonwealth Games. In 2002 he was
awarded a CBE for his services to Sport and Community
and in 2012 he was appointed a Knight Bachelor for his
services to the 2012 Olympic and Paralympic Games.
Charles received the Freedom of the City of London in
2006 and in 2013 was awarded a peerage and sits on
the Labour benches.
Current external roles
Chair of Global Media &
Entertainment Limited
(and a director of associated
group companies)
Chair of Balfour Beatty plc
Chair of the Invictus
Games Foundation
Advisory chair of
Moelis & Company
Chair of Glassmoon
Services Limited
Chair of Grandmet
Management Ltd
Chair of Nell Homes Limited
Director of IGF Trading Limited
Director of Malch Limited
Committee membership
Committee membership
N
Chair
n/a
Committee membership key:
A Audit
N Nomination
Rem Remuneration
S Sustainability
R Risk
RP Related Party
108
Annual Report 2022
Board of Directors (continued)
Damian Sanders
Executive Director & CFO
John Gallemore
Executive Director & COO
Dean Moore
Independent NED & interim SID
Iain McDonald
NED
Edward Koopman
NED
Gillian Kent
Independent NED
Date of appointment: 24 January 2023
(having previously served as an independent
NED from 17 November 2020)
Date of appointment: 24 January 2023
(having previously served as CFO from 24 June 2008)
Damian is a member of the Institute of Chartered
Accountants in England and Wales and was a
Senior Audit Partner at Deloitte LLP for over 20
years, including several years as the leader of
Deloitte’s Technology Practice in the North of
England. Damian has extensive experience of the
retail and technology sectors and has acted as
an adviser and corporate governance specialist
to a number of international listed companies.
Damian brings a wealth of experience to the
Board across audit, accounting, commercial
and risk matters and also business strategy.
His strong financial background, depth of
advisory experience and knowledge of the Group
acquired during his two-year tenure as a NED,
including serving as interim SID and as chair
and a member of various Board Committees,
make him well qualified to serve as CFO.
Prior to co-founding THG in 2004 and serving
as its CFO until January 2023, John was Head
of Finance of the Caudwell Group’s International
Trading Division from 2001 until 2004.
John studied Economics at the University of
Manchester before qualifying as a Chartered
Accountant with Deloitte LLP in 1994. His
business and accounting background, strong
commercial acumen and tenure in international
trading provided the requisite experience to
initially serve as CFO and now as COO, a role
which will allow him to drive the operations of the
Group and build on the progress he has overseen
in the Group’s global fulfilment footprint.
Date of appointment: 15 September 2022
Date of appointment: 27 March 2010
Date of appointment: 3 May 2016
Date of appointment: 15 September 2022
Dean is a chartered accountant with over 35
years of public company experience and brings
with him a depth of City and finance knowledge,
together with significant expertise in the financial
services and retail sectors.
He was previously chief financial officer at
Cineworld Group plc, N Brown Group plc,
T&S Stores PLC and Graham Group plc and
formerly non-executive chair of Tuxedo Money
Solutions Limited. Dean is currently the interim
chief financial officer of Dignity plc (having been
an independent non-executive director upon
appointment), a non-executive director of Griffin
Mining Limited, and senior independent director
at both Cineworld Group plc and Volex PLC.
His financial and City background make him
a valuable addition to the Board and suitably
qualified to serve as interim SID and as chair
of the Remuneration Committee, interim chair
of both the Audit Committee and the Related
Party Committee and as a member of the Risk
Committee.
Iain is the founder and chief investment officer
of Belerion Capital Group Limited, established
in 2018, prior to which he was chief investment
officer of the William Currie Group Limited.
Notable investments include ASOS plc, boohoo
group plc, Metapack Limited, Eagle Eye Solutions
Group PLC, Anatwine Limited and Lifeworks
Corporation Ltd.. Iain is also chair of the UK
Digital Business Association, non-executive chair
of CentralNic Group PLC and a non-executive
director of boohoo group plc where he chairs the
remuneration committee and is a member of the
audit and nomination committees.
Iain holds a degree in Economics and Economic
History from the London School of Economics
and Political Science. He brings broad and
robust experience to the Board, substantiated by
the deep financial expertise gained in his chief
investment officer roles.
Edward is a member of the Executive Committee
of Sofina S.A. and a director of Sofina Capital.
He also sits on the board of Nuxe Group, a
French-based international skincare brand, and
GL Events S.A., a listed global player in event
management. Edward was a founding partner at
Electra Partners/ Cognetas Private Equity (now
known as Motion Equity Partners LLP) and was
also previously a Manager at Bain & Company,
having worked in investment banking at both
Baring Brothers and BNP Paribas.
Gillian has had a far-reaching career in software,
internet, digital media and mobile technology
businesses and formerly held various senior
roles at Microsoft, including Managing Director
MSN UK, where she was responsible for
creating one of the UK’s largest online services
businesses. Both at Microsoft and in other roles,
including as chief executive officer of the real
estate portal Propertyfinder, she established her
expertise in building markets and brands for
products and services.
Edward holds a degree from Ecole de
Management de Lyon (EM Lyon) Business
School and brings a wealth of knowledge to
the Board through his international business
experience and well-honed management skills.
Gillian is currently a non-executive director
of Ascential plc, Mothercare plc, Marlowe plc
and SIG plc, and former positions include
non-executive director at NAHL Group PLC,
Pendragon PLC and Dignity plc and a director
of Portswigger Ltd., a leading software solution
company within the web security industry. Her
executive career and broad PLC experience
ensure Gillian is well-equipped to serve as Risk
Committee Chair and as a member of the Audit
Committee, Nomination Committee, Related
Party Committee and Remuneration Committee.
Current external roles
Current external roles
Current external roles
Current external roles
Current external roles
Current external roles
Senior independent director of Victorian
Plumbing Group plc
None
Interim chief financial officer of Dignity plc
Senior independent director of Cineworld
Group plc
Senior independent director of Volex PLC
Non-executive director of Griffin Mining
Limited
Chief investment officer of Belerion Capital
Group Limited
Member of Executive Committee
of Sofina S.A.
Chair of the UK Digital Business Association
Director of Sofina Capital
Non-executive chair of CentralNic Group
PLC
Non-executive director of boohoo group plc
Director of Nuxe Group
Director of GL Events S.A.
Non-executive director of Ascential plc
Non-executive director of Marlowe plc
Non-executive director of Mothercare plc
Non-executive director of SIG plc
Committee membership
Committee membership
Committee membership:
Committee membership:
Committee membership
Committee membership:
n/a
n/a
A
Interim Chair
Rem
Chair
R
RP
Chair
N
Rem
S
Chair
n/a
A
N
Rem
R
Chair
RP
109
Committee membership key:
A Audit
N Nomination
Rem Remuneration
S Sustainability
R Risk
RP Related Party
110
Annual Report 2022
Role of the Board
As mandated by the Code, a formal Schedule of Matters
Reserved to the Board (“Schedule of Reserved Matters”)
has been published on the Company’s website detailing
those items of business, including certain strategic items
and corporate and capital structure approvals, which are
expressly reserved for the Board’s collective consideration,
ratification and/or oversight (as appropriate). The overriding
responsibility of the Board is, however, to promote the
long-term, sustainable success of the Company, generating
value for Shareholders and contributing to wider society,
an obligation which sits at the core of Board discussions
and decision-making processes.
The Board seeks to discharge this primary duty through
the successful delivery of the Company’s five strategic
priorities which flow from the Company’s stated purpose,
namely to drive impact through scale, innovation and
expertise. THG’s purpose, together with its vision and values,
are considered within the “Our purpose, vision and values”
section of the Strategic Report on pages 8-10 but, notably, the
purpose has been determined with reference to the diversity
of the Company’s stakeholder base and formulated to guide
a strategy that aims to deliver long-term, sustainable growth,
whilst promoting environmental and social responsibility.
THG’s core values of leadership, innovation, decisiveness
and ambition, together with the recently launched value
of collaboration, underpin this approach and inform an
entrepreneurial and values-led Group culture that supports
the delivery of THG’s strategic aims and objectives, thereby
generating value for stakeholders (further details on which
are included within the “Our strategy” section of the Strategic
Report on pages 11-12).
In seeking to provide the effective and entrepreneurial
leadership required by the Code, the Board recognises the
importance of active stakeholder engagement to ensure
it remains fully apprised of the views of all relevant parties
and is therefore suitably equipped to properly discharge
the responsibilities incumbent upon it. Six key stakeholder
categories have been identified as critical to THG’s future
success and further information on these categories,
together with details of the Company’s stakeholder
engagement framework, can be found within the “Section
172 Statement Stakeholder Engagement” section of the
Strategic Report on pages 47-54. From a more focused
perspective, the Company maintains its “open door” policy
with Shareholders to allow ongoing and constructive
dialogue to take place throughout each calendar year, thus
ensuring that Shareholders’ objectives, interests and views
are understood and appropriately factored into the Board’s
consideration of key financial, operational, strategic and
ESG matters. Additionally, the Company’s annual general
meeting affords Shareholders the opportunity to engage
in person with Board members, whilst the maturing Investor
Relations programme seeks to improve dialogue with
investors and analysts alike.
Under the terms of the Schedule of Reserved Matters and
in accordance with the Code, ultimate responsibility for
the management of risk within the Company rests with
the Directors; specifically, the Board is responsible for
ensuring that a sound system of internal controls and risk
management framework are in place which allow risk to be
effectively identified, assessed and managed. In discharging
its risk management responsibilities, including overseeing
the Group’s controls framework, determining organisational
risk appetite and undertaking a robust and ongoing
assessment of the principal and emerging risks facing the
Group, the Board was supported during the 2022 reporting
period by the Audit Committee and the Risk Committee
(the activities of which are contained in the respective
Committee Reports on pages 123-132).
Full details of the Group’s risk management framework,
risk appetite and risk identification process can be found
within the “Risk management and informed decision
making” section of the Strategic Report on pages 83-95.
This section includes confirmation that, during the 2022
reporting period, the Board (assisted, as appropriate, by
the Audit Committee and the Risk Committee) reviewed
the effectiveness of the risk management framework and
internal control systems and identified no instances of
significant control failings or weaknesses.
Board composition
and responsibilities
Further to a review of the Group’s corporate governance
arrangements, the need for an independent chair was
identified during the 2021 reporting period to ensure that,
in compliance with the Code, a clear division of responsibility
was established between the leadership of the Board and the
executive leadership of the business. Following an extensive
recruitment process, further details on which are contained
in the Nomination Committee Report on pages 133-137,
Charles Allen was recommended as a suitable candidate
and thereafter appointed Independent Chair in March
2022. From the start of the 2022 reporting period until the
appointment of the Independent Chair, the Board was led
by Matthew Moulding who had been appointed chair of the
Company in 2019 and who has continued to serve as CEO
since his appointment in 2008.
Acknowledging the Independent Chair’s mandate to refresh
and strengthen the Board by improving its independence
and diversity, Board composition remained an ongoing
focus of the Nomination Committee throughout 2022,
with particular consideration being given to overall
independence and the balance of Executive Directors /
NEDs (and noting that two former independent NEDs,
Tiffany Hall and Dominic Murphy, stepped down from the
Board in, respectively, March 2022 and June 2022 and,
thereafter, Zillah Byng-Thorne, former SID, and Andreas
Hansson, a former NED, also stepped down in September
2022). Significant progress was made in this regard during
the year and, following a twin-track external and internal
recruitment search, Gillian Kent and Dean Moore were
appointed as independent NEDs in September 2022.
Additionally, in light of the in-depth understanding of the
Group’s businesses, People and culture which Damian
Sanders had acquired during his tenure as an independent
NED, it was considered appropriate to appoint him to the
position of CFO at the start of 2023 and, simultaneously,
appoint John Gallemore, the incumbent CFO, to COO. The
considerations of, and process followed by, the Nomination
Committee in recommending these appointments and
Board changes are detailed within the Nomination
Committee Report on pages 133-137.
A summary of these Board changes is as follows:
Appointment Resignation Date
2022 to appraise the Independent Chair’s performance
(further information on which can be found in the “Board
evaluation” section of the Nomination Committee Report
on pages 133-137). It is expected that the current interim
SID, Dean Moore (appointed to the position on 24 January
2023), will continue to serve as a trusted intermediary for
Directors and Shareholders alike and meet with the NEDs,
as and when considered necessary and/or appropriate,
throughout 2023 (until such times as a permanent SID
appointment is made).
More generally, Board coherence and effectiveness is
cultivated through informal debate and discussion outwith
the confines of Board and Board Committee meetings.
Such unstructured interaction amongst Board members
is considered a key means through which Board relations
can be developed, fostered and enhanced and it is
encouraged through, for example, the annual Board dinner
and biannual NED-only sessions (as introduced by the
annual Board planning cycle, referred to in the “Board
meetings and activities” section which follows).
NED/
Former NED
Tiffany Hall
Charles Allen
Dominic Murphy
Gillian Kent
Dean Moore
Zillah Byng-Thorne
Andreas Hansson
x
x
x
x
x
x
x
18 March
2022
22 March
2022
8 June
2022
15 September
2022
15 September
2022
15 September
2022
15 September
2022
24 January
20231
Damian Sanders
n/a
n/a
1. This is the date on which Damian Sanders stepped down as a NED
and was appointed an Executive Director.
In addition to discharging their mandated duties under
the Code (as reflected within the published SID role
description), the SID is expected to provide independent,
objective and robust oversight of and, where necessary,
challenge to all matters which come before them. Indeed,
prior to the appointment of the Independent Chair, the SID
function was viewed as affording a critical governance
overlay within the Group providing, as it did, an important
safeguard where any conflict may have been perceived
to arise from Matthew Moulding’s dual role.
During the 2022 reporting period (and noting the various
Board changes which were enacted), ongoing discussions
took place between the SID and the NEDs to ensure Board
relations were suitably fostered and Board effectiveness
optimised, including a SID-led discussion in December
111
112
Annual Report 2022 The current Board comprises three Executive Directors (i.e. the CEO, the CFO and the COO) and five NEDs, three of whom
(including the Chair) are deemed to be independent in character and judgement (as considered further in the “Board
independence” section of this Governance Report).
A summary of the principal responsibilities of Board members and the Company Secretary is as follows:
Independent Chair
Charles Allen
• Provides leadership to the Board
• Facilitates constructive Board relations and the effective contribution of all NEDs
• Chairs Board meetings and promotes a culture of openness and debate
• Ensures effective and ongoing communication with Shareholders and other stakeholders
• Sets the agenda for Board meetings in conjunction with the Company Secretary
and ensures Directors receive accurate and timely information
Chief Executive Officer
Matthew Moulding
Chief Financial Officer
Damian Sanders
Chief Operating Officer
John Gallemore
• Provides leadership to the Executive
Leadership Team
• Oversees the day-to-day management
of Company and Group business
• Determines the strategic direction and
business objectives of the Group
• With the support of Senior Management,
oversees the effective implementation of
Group strategy
• Engages with key Shareholders and
stakeholders
• Responsible for the Group’s financial
matters and applicable legislative
and regulatory compliance
• Works with the CEO to develop
strategic objectives
• Monitors the Group’s financial
performance
• Ensures the Group remains
appropriately funded and capital
structure is effectively managed
• Oversees the day-to-day management
of the Group’s global operations
• Monitors operational performance
and provides the necessary
strategic advice to ensure delivery
of operational targets
• Ensures the implementation of
business strategies and operational
capabilities to drive operational
efficiencies and alignment with the
Group’s strategic aims and objectives
SID
Dean Moore (interim)
• Acts as a sounding board for the
Chair and supports, as required,
in the discharge of their duties
and responsibilities
• Acts as an intermediary for the
Directors as and when necessary
• Available to Shareholders with
concerns which have not been
resolved through the normal
communication channels
• At least annually, meets with the
NEDs, in the absence of the Chair,
to appraise the Chair’s performance
NEDs
Edward Koopman,
Iain McDonald and Gillian Kent
Company Secretary
James Pochin
• Provide active and constructive
challenge and contribute to the
development of strategy
• Monitor the performance of the
Executive Directors against agreed
objectives and ensure robust risk
management
• Ensure the Board and Board
Committees fulfil their responsibilities
and are ably equipped to do so
• Ensure the Board is balanced and
appropriate succession planning is
undertaken, allowing it to provide
clear and effective leadership across
the organisation
• Acts as secretary to the Board
and Board Committees and provides
the requisite support
• Advises the Board on all relevant
legislative, regulatory and
governance matters
• Ensures the Board has the appropriate
policies, procedures and resources
in place to function effectively and
align with best practice
• Assists with communication
between the Board and Shareholders
and is responsible for annual general
meeting organisation
Board meetings and activities
A minimum of eight Board meetings are scheduled per
annum, with additional meetings convened on an ad
hoc basis to ensure there is ongoing and effective Board
oversight of all time-sensitive and/or material Group
matters throughout any financial year, including in respect
of key strategic, commercial and financial performance
items. During 2022 the Board met on 14 occasions, with
Board member attendance set out in the table which
follows. Director attendance at Board Committee meetings
is detailed within the various Board Committee Reports,
contained on pages 123-157 of this Annual Report.
Director
2022 Attendance
Charles Allen1
Matthew Moulding
John Gallemore
Damian Sanders
Iain McDonald
Edward Koopman2
Gillian Kent3
Dean Moore4
Zillah Byng-Thorne5
Andreas Hansson6
Dominic Murphy7
Tiffany Hall8
10/11
14/14
14/14
14/14
14/14
13/14
2/3
3/3
9/11
11/11
6/6
3/3
1. Charles Allen attended 10 of the 11 Board meetings which took place
following his appointment on 22 March 2022. He was unable to attend
the Board meeting immediately following his appointment due to
a prior commitment.
2. Edward Koopman was unable to attend one of the 14 Board meetings
which took place during 2022 due to a conflicting commitment.
3. Gillian Kent attended two of the three Board meetings which took place
following her appointment on 15 September 2022. She was unable to
attend the Board meeting immediately following her appointment due
to a prior commitment.
4. Dean Moore attended the three Board meetings which took place
following his appointment on 15 September 2022.
5. Zillah Byng-Thorne attended nine of the 11 Board meetings which took
place prior to her stepping down from the Board on 15 September 2022.
6. Andreas Hansson attended the 11 Board meetings which took place
prior to him stepping down from the Board on 15 September 2022.
7. Dominic Murphy attended the six Board meetings which took place
prior to him stepping down from the Board on 8 June 2022.
8. Tiffany Hall attended the three Board meetings which took place prior
to her stepping down from the Board on 18 March 2022.
As disclosed in the 2021 Annual Report, the Company
launched a new online tool during the 2021 reporting period
which allows for the distribution of all Board and Board
Committee documentation via a secure electronic platform.
This platform also serves as a centralised storage facility
through which documentation can be stored and accessed
by Directors on an ongoing basis. During 2022 the use
of this platform became more deeply embedded within
the enhanced governance processes of the Company,
providing, as it does, increased security around information
distribution and storage, and is now the standard means
by which monthly Board packs and Board Committee
papers are circulated.
As detailed in the Nomination Committee Report contained
within the 2021 Annual Report, the form and content of
monthly Board meetings was an area highlighted for
consideration in the 2021 Board evaluation, including the
proposal to streamline and invert the standard Board
agenda by, for example, restricting the more fulsome
Divisional updates and thereby allowing increased focus
on key topics such as People, Sustainability and Investor
Relations. Following the appointment of the Independent
Chair in March 2022 this output was given further
consideration and during 2022 certain changes were
effected vis-à-vis the format and content of Board meetings.
Whilst monthly Board packs continue to incorporate
the previous month’s financial results, on a Group and
Divisional basis, content has been refined, as considered
appropriate, and the agenda streamlined and inverted as
proposed. Senior Management now present on a “taken
as read” basis in terms of Board pack material, with a
more focused Q&A element having been introduced into
meetings. Regular “deep dives” also take place into key
Divisional and/or Group topics on which Directors have
requested further insight/discussion. This is an item which
remains subject to ongoing Board consideration, as detailed
within the “Board evaluation” section of the Nomination
Committee Report on pages 133-137.
To ensure that Directors have sufficient time to prepare for
meetings and read and evaluate any supporting papers,
Board and Board Committee documentation is generally
issued no later than three working days in advance of
a meeting, together with the meeting agenda which is
agreed between the Company Secretary and relevant
Board Committee Chair (albeit timings may be impacted
on occasion by the volume, source and/or availability of
information). The minutes of any previous Board meeting(s)
are included within monthly Board packs and these are
tabled for approval (subject to any comments/required
amendments), as is the case for Board Committee minutes
which will also be circulated with supporting papers and
tabled for approval.
113
114
Annual Report 2022
In addition to addressing the standard items of business
detailed within the aforementioned Schedule of Matters,
the Board also considered a number of other matters
during 2022 including (but not limited to):
Board Committees
and governance structure
Pursuant to the Schedule of Reserved Matters previously
referred to, the Board is authorised to establish the Board
Committees which, through the delegation of authority
narrated within their Terms of Reference, support the Board
in the proper and effective discharge of its duties and
responsibilities.
Accordingly, to ensure the most robust governance
structure exists within the Group to comprehensively
support the Board and promote long-term, sustainable
value creation for Shareholders, a Board-constituted
Nomination Committee, Audit Committee and
Remuneration Committee were established at the time of
Admission (in compliance with the Code), together with the
Related Party Committee, the Sustainability Committee and
the Risk Committee (the latter two being established during
2021). As detailed within the “Board evaluation” section of
the Nomination Committee Report on pages 133-137,
and in line with the Company’s ongoing PLC transition,
the scheduled monthly Board meeting agenda continued
to evolve during 2022 resulting in, amongst other things,
the inclusion of Board Committee updates as a standing
agenda item.
Further information on the composition and activities of
the Board Committees during 2022 can be found within
the respective Board Committee Reports on pages 123-157,
together with details of the membership changes which
took place to reflect outgoing and incoming NEDs. The
Nomination Committee was responsible for making
recommendations to the Board in respect of Board
Committee membership (where appropriate, following
consultation with the relevant Board Committee Chair)
and, in doing so, took into account not only the specific
skillsets and experience of individual NEDs but also the
time commitment expected of them and their external
commitments.
•
•
•
•
Corporate activity and Group structure: overseeing
the completion of the internal Divisional reorganisation
(including the subsequent hypercare process)
resulting in a simplified Group structure and providing
material optionality and flexibility to enter into
future strategic partnerships and generate value
accretion for stakeholders; detailed consideration
of indicative third-party proposals for the Group
and unanimously concluding that such proposals
significantly undervalued the Group and its future
prospects and should therefore be rejected; and
overseeing the mutual termination of the option and
collaboration agreement with Softbank in light of
global macroeconomic conditions.
Governance: ongoing review of certain corporate
governance arrangements including a continued focus
on preparing to step up to the Premium Segment of
the London Stock Exchange’s Main Market at the
appropriate time, with timing subject to the outcome
of the FCA’s ongoing review vis-a-vis reform of the
current listing regime; further to the Nomination
Committee’s recommendations, considering and
approving the appointment of Damian Sanders as
CFO, John Gallemore as COO and three independent
NEDs, including the Independent Chair, to the Board;
and, as previously detailed, considering the format and
content of Board meetings/packs to ensure enhanced
Board effectiveness, together with implementation of
an annual Board planning cycle incorporating monthly
deep dives and certain key Board activities.
Strategy: ongoing consideration of the Group’s
strategic aims and objectives in light of the challenging
macroeconomic backdrop including: (i) regularly
reviewing the impact of inflationary pressures, elevated
commodity pricing, FX headwinds and ongoing supply
chain issues (and in conjunction with the general
risk management approach); and (ii) focusing on the
Group’s growth strategy across a number of large
global sectors, anticipated to deliver long-term value for
Shareholders and ensure the Group remains on track to
be cash flow positive in 2024.
General: against the backdrop of a number of global
factors, including the war in Ukraine, Covid-19 related
lockdowns in Asia and unprecedented inflationary
pressures, ongoing oversight of market guidance
and consensus and the Group’s profit improvement
initiatives; and considering and approving a new
£156m banking facility, provided equally by three
existing lenders.
Further information on the key discussions and principal
decisions taken by the Board during the 2022 reporting
period, including stakeholder considerations, can be found
in the “Section 172 Statement Stakeholder Engagement”
section of the Strategic Report on pages 47-54.
The governance structure within the Group at the end of the 2022 financial
year, and as at the date of this Governance Report, is as follows:
Board
Chair: Charles Allen
Provides effective leadership and promotes the long-term, sustainable success of the Company and the Group,
whilst setting and overseeing the successful delivery of strategic aims and objectives
Nomination Committee
Chair: Charles Allen
Remuneration Committee
Chair: Dean Moore
• Regularly reviews structure, size and composition of the Board
• Sets remuneration policy for all Executive Directors
Committees and the Board, including the Board’s balance of skills,
knowledge, experience and diversity, to ensure membership remains
fit for purpose and the Group’s leadership needs are met
• Ensures remuneration policies and practices support strategy
and promote Group long-term success
• Makes appropriate recommendations with regard to any Board
changes it considers necessary and identifies and nominates
candidates for Board approval
• Approves design of, and determines targets for, any performance-related
pay schemes and determines policy and scope of pension arrangements
for Executive Directors
• Oversees plans for the orderly succession of appointments to Board
and Senior Management, ensuring appointments and succession plans
are based on merit and objective criteria and with due regard
to applicable D&I targets
• Reviews and has regard to pay and employment conditions across the
Group and considers any major changes in employee benefit structures
Audit Committee
Chair (interim): Dean Moore
Risk Committee
Chair: Gillian Kent
Supports the Board in fulfilling oversight responsibilities by reviewing
and monitoring:
Assists Board in its oversight of risk, including:
•
•
•
independence and effectiveness of internal/external audit functions
integrity of financial and narrative statements
internal financial controls and, as appropriate and in conjunction with the
Risk Committee, risk management framework
• monitoring, management and mitigation of principal and emerging risks,
including definition and execution of risk management strategy and
associated risk policies
• advising on overall risk appetite, tolerance and strategy
•
reviewing and monitoring robustness of the Group’s risk management
framework, policies and procedures when tested against risk strategy
and appetite
Sustainability Committee
Chair: Iain McDonald
Related Party Committee
Chair (interim): Dean Moore
• Reviews and ensures appropriate and effective strategies, policies and
operational controls are in place to conduct business in a responsible
manner, including assessing and monitoring performance against 2030
Sustainability Strategy and ESG targets
• Oversees compliance with all applicable sustainability-related legal and
regulatory requirements and ensures the Group’s standards of business
reflect best practice
• Supports the Board in delivering strong, sustainable growth across its
business and supply chains, in global markets and covering all aspects
of the customer ecosystem
• Oversees and approves the terms of any transaction, arrangement
or agreement between the Propco Group and any Group company,
other than those in the ordinary course of business
• Ensures all such transactions, arrangements or agreements continue
to be in the best interests of the Company and its Shareholders
Executive Leadership Team
• Executes delivery of agreed strategic objectives
• Oversees day-to-day management of Group operations
• Provides regular Board updates on operational performance
115
116
Annual Report 2022 Board appointments,
recruitment and succession
Board composition is monitored on an ongoing basis to
ensure that the Directors, collectively, have the necessary
skillsets to effectively deliver the Group’s strategic aims
and objectives and the balance of skills, knowledge and
experience remains appropriate for a company of the size,
nature and stage of development of THG. Accordingly, and
as previously detailed within this Governance Report, Board
composition remained subject to scrutiny throughout 2022
(and up to the date of this Governance Report), with particular
consideration being given to overall independence and the
balance of Executive Directors / NEDs.
The need for an independent chair was recognised
pursuant to a review of corporate governance
arrangements and, following the Nomination Committee’s
recommendation, the Board considered and approved
the appointment of Charles Allen as Independent
Chair, effective from 22 March 2022. Subsequently,
and with a particular focus on the Independent Chair’s
mandate to refresh the Board and strengthen it by
improving its independence and diversity, Gillian Kent
and Dean Moore were appointed independent NEDs
on 15 September 2022. With both appointees bringing
extensive and relevant sector and PLC board experience,
and demonstrating strong track records in business
growth, these appointments were viewed as enhancing
not only the skillsets and experience on the Board but
also overall independence (noting that former SID Zillah
Byng-Thorne stepped down contemporaneously with
these appointments, together with non-independent NED
Andreas Hansson). Additionally, in January 2023 and as
considered further in the Nomination Committee Report
on pages 133-137, independent NED Damian Sanders was
appointed CFO and the incumbent CFO, John Gallemore,
appointed COO.
The following matrix sets out the key competencies
of individual Board members:
Skills
Leadership
Name
UK listed
PLC
Technology/
e-commerce
Marketing/
branding
Retail
industries
M&A
Global
operations
Governance
Finance &
accounting
Risk
management
Strategy &
development
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Charles
Allen
Matthew
Moulding
John
Gallemore
Damian
Sanders
Edward
Koopman
Iain
McDonald
Gillian
Kent
Dean
Moore
117
The process followed by the Nomination Committee in
recommending the three aforementioned Board appointees
is detailed within the Nomination Committee Report on
pages 133-137. As disclosed, appointments were made
on the basis of merit, with potential candidates assessed
against objective criteria, and with regard to the need to
promote diversity in the boardroom (including with respect
to gender, as reflected in Axon Moore’s search mandate
for suitable independent NEDs). Indeed, the breadth of
benefits which a diverse board can bring to a company,
including a more inclusive culture and improved corporate
governance generated via a broader insight/knowledge
base, are recognised and, as disclosed in the 2021 Annual
Report, the Board remains aligned with the FRC’s position
that, by reducing the risk of group think, diversity can
have a positive effect on the quality of decision-making
(Guidance on Board Effectiveness (July 2018)). Therefore,
in considering and recommending Board appointments,
the Nomination Committee seeks, as appropriate, to
promote, amongst other things, diversity of gender, ethnic
background and personal strengths to ensure Board
effectiveness is maximised through enhanced decision-
making which, in turn, results in enhanced value creation
for stakeholders.
Details of how potential Board appointees are identified
are also included within the Nomination Committee
Report and, as required by the Code, an independent
search consultant was formally appointed to assist with
the recruitment of an independent chair. Recruitment
consultancy firms may also be engaged to facilitate
a search for a particular position and, on occasion, the
Board and Senior Management may be asked for candidate
recommendations from within their professional networks.
Whilst the Nomination Committee remained cognisant
of the need to ensure the Company’s leadership was
appropriately structured to effectively oversee the delivery
and execution of the Group’s strategic aims and objectives
during 2022, it also gave due consideration to the skills and
experience that might be required to effectively address
and manage upcoming challenges and opportunities.
Additionally, in considering the balance of skills, knowledge
and experience on the Board (and the Board Committees),
a related responsibility of the Nomination Committee was
to ensure appropriate succession planning was undertaken
from a Board and Senior Management perspective to
satisfy any potential leadership needs that could arise
both in the short and the medium to long term.
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Annual Report 2022 Board induction,
training and support
Throughout 2022 the Company continued to
develop and refine its Board induction and training
arrangements to ensure all Directors possess and/or
acquire the requisite market and operational knowledge
to oversee the successful delivery of the Group’s strategy.
A structured onboarding programme is now in place for
all new Board members which includes both internal
briefing memorandums on core regulatory and legislative
items (such as the UK Market Abuse Regulation, inside
information and insider dealing) and face-to-face/
interactive training and update sessions with relevant
external advisers (e.g. legal and remuneration) to ensure
Directors are fully aware of the duties and responsibilities
incumbent upon them as PLC directors and Board
Committee members. Whilst one-to-one sessions are
typically arranged with members of Senior Management
to provide new Board members with a general introduction
to all areas of the business, more focused/tailored sessions
may also be arranged when, for example, a Director has
a particular area of interest or wishes further insight/data
on certain Group and/or Divisional items.
Following the induction process, the continuing
professional development needs of the Board (both
collective and individual) remain subject to ongoing
oversight and a number of measures are now in place to
keep Directors suitably apprised of applicable legislation,
guidance and market practice/developments and any
changes to, and/or proposals on, the corporate governance
landscape. In addition to the Company’s legal advisers
attending scheduled Board meetings to run condensed
training sessions on topics such as the FCA’s proposed
audit and governance reforms, the selective disclosure of
inside information and the new climate/TCFD and diversity
reporting requirements, associated briefing papers are
also included within Board packs for Directors’ longer-
term information/reference. As previously disclosed, the
new annual Board planning cycle has introduced regular
deep dives which ensure that NEDs are kept up to date
on key Group and Divisional items, including operational
issues, market challenges and landscape, and People and
Sustainability matters, with broker and investor updates
incorporated as appropriate.
The Company has arranged membership of the Non-
Executive Directors’ Association for all Board members
(including Executive Directors) to ensure individual
knowledge and skillsets are suitably refreshed and via
which Directors are provided with technical knowledge
updates and have access to a monthly programme of
seminars and briefings (including networking opportunities).
The Company is fully supportive of Directors attending any
such events which may be of interest and/or which address
particular training needs.
THG remains committed to ensuring that the necessary
resources are available to the Board and Board Committees
to allow them to function effectively and efficiently and,
more generally, that the Group’s corporate governance
framework is appropriately structured to meet both its
immediate and longer-term needs. The Company Secretary
plays a key role in this regard, advising on legal, regulatory
and governance matters and ensuring they are available to
advise/assist Directors as and when required.
Board independence
The Board currently comprises three Executive Directors
(i.e. the CEO, the CFO and the COO) and five NEDs,
three of whom (including the Chair) are deemed to be
independent in character and judgement following due
consideration of their individual circumstances against
Code Provision 10. Further to a critical appraisal of the issue
by the Board and as previously disclosed in, for example,
the 2021 Annual Report, the holding of Ordinary Shares
by NEDs is not considered to impair their independence
but, rather, is viewed as aligning their interests with those
of Shareholders more generally and thus with the long-
term interests and success of the Company. Consequently,
NEDs may purchase Ordinary Shares at market value via a
broker and facilitated by the Company if required. Directors’
shareholdings are set out on page 151 of the Directors’
Remuneration Report.
Upon analysis of the relevant Code provisions, Edward
Koopman is not deemed to be independent, having been
appointed to the Board prior to Admission to represent
Sofina Capital S.A. (“Sofina”), a major Shareholder. Edward
Koopman is both an employee of Sofina and a member of
its Executive Committee, although it should be highlighted
that, whilst Sofina continued to hold Ordinary Shares
following Admission, his continued directorship is not in
a Shareholder-representative capacity. Iain McDonald is
also not regarded as independent, with reference to the
tenure provisions of the Code and noting that he was
appointed to the Board prior to Admission in 2010.
At the end of the 2022 reporting period the Board
comprised two Executive Directors and six NEDs, four
of whom were regarded as independent – namely, Charles
Allen, Damian Sanders, Gillian Kent and Dean Moore. On
an analysis which incorporates the strict letter of the Code
and excludes the Independent Chair, the Code Provision
11 requirement that at least half the Board be independent
NEDs was not satisfied at the financial year end.
As discussed in further detail in the Nomination Committee
Report on pages 133-137, and in light of the Chair’s express
mandate to refresh and strengthen the Board by improving
independence and diversity, Board composition will remain
a key focus throughout 2023, and with particular regard
to overall independence and the balance of Executive
Directors / NEDs.
Conflicts of interest
and time commitment
Whilst the Directors have a statutory duty to avoid
situations where they have, or can have, an interest that
conflicts, or may possibly conflict, with the Company’s
interests, and must declare the nature and extent of any
such interest, the Articles of Association permit non-
conflicted Directors to authorise any such conflict, on such
terms and conditions as they think fit. A conflict of interest
situation which arose during 2022 related to the Board’s
consideration of the unsolicited, indicative, non-binding
proposal received for the entire issued share capital of the
Company from a consortium led by Belerion Capital Group
Limited (“Belerion”) and King Street Capital Management
L.P.. NED Iain McDonald is the founder and chief
investment officer of Belerion and, as such, a clear conflict
of interest was determined to exist which required that Iain
McDonald was not present during any Board discussions
relating, directly or indirectly, to the proposal or any other
proposals received by the Company.
The NEDs’ Letters of Appointment (“Appointment Letters”)
recognise that NEDs may have business interests outwith
those of the Company but require that no NED puts
themselves in a position where their duties to any other
person, firm or company conflict with their duties to the
Company or the wider Group. The Appointment Letters
further require that any actual or potential conflict of
interest must be communicated to the Board as soon as
it becomes apparent, and at least seven days’ written notice
must be provided to the Chair before a NED accepts an
appointment as a director, agent, employee or consultant of
any company or firm engaged in a business competing with,
or similar to that of, the Company or any Group company.
The Group occupies and utilises property assets which
are owned by the Propco Group, which itself is wholly
owned by the CEO (who is also a major Shareholder).
As a result of these arrangements, the Board-constituted
Related Party Committee was established post-Admission
to oversee and approve Related Party Transactions and
provide the requisite governance structure within which any
actual or potential conflicts of interest could be considered
and addressed. Whilst officers of the Propco Group were
also previously officers of the Company, this situation has
been rectified to avoid any perceived or actual conflicts of
interest arising. Further information on the responsibilities
and activities of the Related Party Committee can be found
in the Related Party Committee Report on pages 138-140.
The time commitment expected of, and expended by, NEDs
is kept under ongoing review by the Board, in conjunction
with the Nomination Committee. Under the terms of their
Appointment Letters and pursuant to Code Principle H,
NEDs must confirm they have sufficient time to undertake
the duties and responsibilities incumbent upon them and
have disclosed details of all other significant business (and
other) interests and a broad indication of the time required
for such commitments. The Board must be kept advised
of any subsequent changes to such commitments (and of
any new commitments that may have implications on a
NED’s ability to commit sufficient time to their role) and,
again, at least seven days’ written notice must be provided
to the Chair before a NED accepts any external additional
commitments which may impact the time they are able
to commit to their Board role. In addition to attending
standard Company meetings (including Board meetings,
Board Committee meetings and the Company’s annual
general meeting), NEDs are expected to devote sufficient
time to appropriate preparation ahead of such meetings
and, generally, to commit additional time to their role as
circumstances require (and particularly when the Company
is undergoing a period of increased activity).
At the date of this Governance Report the Board is satisfied
that the current external commitments of its NEDs, as
detailed within their biographies on pages 108-110, do not
compromise their effectiveness or performance.
Workforce engagement and D&I
As a People-led organisation THG recognises the
importance of robust and consistent workforce
engagement to ensure the Board understands, and
appropriately considers and addresses, the most salient
employee issues and concerns. Falling within the
scope of the 2030 Sustainability Strategy, the subject
of employee engagement was a combined key focus
of the Sustainability Committee and the People
team during 2022 (and remains so in 2023), and
engagement mechanisms were kept under ongoing
review and update to ensure they remained effective
and appropriate for a company of the nature and
scale of THG (as required by the Code). Whilst further
information on engagement measures and progress can
be found in the “Empowering people and communities”
section of the Strategic Report on pages 71-73, key
initiatives included the ‘b-Heard Survey’ which was run
by a workforce engagement specialist and provided
employees globally with the opportunity to feed back
on all aspects of their working life, from their personal
growth and wellbeing through to leadership and
management items. The Survey responses are currently
being assessed to help identify those areas where the
Group excels, whilst highlighting engagement challenges
and opportunities for improvement; the feedback from
UK-based employees will contribute to THG’s 2023
‘Best Companies’ accreditation submission.
With reference to Code Provision 5, the Board considers
that effective arrangements are in place in respect of
workforce engagement which ensure clear and transparent
lines of communication exist between the workforce,
Senior Management and the Board. As detailed in the
preceding “Board Committees and governance structure”
section of this Governance Report, the inclusion of
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120
Annual Report 2022 stakeholder issues (further information on which can
be found in the “Section 172 Statement Stakeholder
Engagement” section of the Strategic Report on
pages 47-54). Indeed, through striving to deliver on
THG’s purpose and strategic priorities, the Board aims
to generate long-term, sustainable growth and, in turn,
secure positive change for all THG stakeholders across
the locations and communities within which it operates.
Evidencing THG’s commitment to embed sustainability
best practice at the heart of the business, Executive
Directors and Senior Management have been set
relevant sustainability-linked objectives from 2022
onwards, with an increased focus in personal reviews
on sustainability-related, and not simply commercial,
outcomes. However, to ensure that the appropriate
foundations are in place for the Group to achieve its
vision and deliver effectively on THG x Planet Earth,
a Board-approved Social Impact Strategy was developed,
with employee input, during the 2022 reporting period.
This Strategy will be rolled-out during 2023 and is
focused on maximizing THG’s impact on, and addressing
social issues within, its local and global communities; it
comprises three pillars – namely, championing inclusion,
disrupting inequality and creating opportunities – each
with defined areas of focus which, collectively, ensure
THG’s social impact is targeted on a group-wide basis.
The launch of the Social Impact Strategy, details on
which can be found within the “Our people” section
of the Strategic Report on pages 74-78, is considered
to further demonstrate THG’s social conscience and
underline its robust commitment to act as a force for
good and seek to create a better, more sustainable
future for all.
Board Committee updates was introduced as a
standing agenda item at monthly Board meetings
during 2022, in turn ensuring the Board is kept suitably
apprised of employee engagement initiatives via the
NED Sustainability Committee Chair. Additionally, a
People section is incorporated within monthly Board
packs and the non-statutory Group Talent Director,
who has ultimate oversight of the Group’s workforce
engagement initiatives, is also in attendance at monthly
Board meetings to take questions and report to the
Board on the wider People piece. On a day-to-day
basis the Group’s D&I Committee Champions play
a key engagement role, driving general workforce
engagement and representation within their Divisions
whilst collaborating with, and reporting into, Senior
Management. This reporting framework ensures the
‘employee voice’ is heard at an appropriately senior level
within the Group and, as Senior Management typically
attends the monthly Board meetings, this further
facilitates regular updates and feedback being shared
directly with the Board.
In placing its People at the heart of the organisation
THG considers that a truly engaged and empowered
workforce will result in an enhanced workplace culture,
in turn serving to enhance operational resilience
and growth. It has recently been agreed that the
Group’s employee engagement strategy, including
implementation thereof, should become a recurring
agenda item for the Remuneration Committee which,
it is considered, evidences how seriously the Company
and the Board view their responsibilities in respect of
workforce engagement.
Further details on how engagement strategies positively
impact decision-making throughout the organisation,
including at Board level, can be found in the “Section
172 Statement Stakeholder Engagement” section of the
Strategic Report on pages 47-54.
‘Empowering People and Communities’ is one of the
three key priorities under the 2030 Sustainability
Strategy, THG x Planet Earth, which affirms that
THG’s greatest asset is its People. Indeed, the 2030
Sustainability Strategy recognises that to bring out
the best in its People the Group must foster a diverse
and inclusive environment to ensure its People feel
empowered to make a positive difference in the world.
D&I represents another key focus area for the Board
and during 2022 a Board-approved D&I Strategy was
launched which seeks to enhance THG’s meritocratic
culture by building upon the Group’s approach to
inclusion and diversity at every level within, and every
location across, the organisation.
The Group’s D&I vision is to further curate a diverse,
inclusive and supportive work environment - reflective
of the communities within which THG operates and
comprising talented and motivated individuals - and it is
considered that this updated D&I Strategy provides clear
direction for achieving this vision. Further information
on the Group’s approach to D&I-related matters,
together with details on how the Group supports the
wellbeing and development of its workforce, can be
found in the “Empowering people and communities”
and “Our people” sections of the Strategic Report.
The “Our people” section also includes key D&I data
required to be disclosed pursuant to section 414C
of the Companies Act.
Board evaluation
Building on the results of the previous Board evaluation
which was discussed in the 2021 Annual Report (the
“2021 Evaluation”), the Company’s second Board
evaluation took place at the end of 2022. As before,
the Company engaged a third-party market leader within
the advanced digital evaluation space and used their
online platform to run the evaluation which was aligned
with best market practice and the content tailored, as
appropriate, to the specific requirements of the Company.
As required by the Code, the evaluation considered
not only the effectiveness of individual Directors but
also the collective effectiveness of the Board and
Board Committees, including specific consideration of,
for example, composition and diversity. Certain of the
outputs and actions flowing from the evaluation are
detailed within the Nomination Committee Report on
pages 133-137, together with insights on progress against
the 2021 Evaluation. Significantly, the overall conclusion
was that the Board and the Board Committees continue
to function in an effective manner and each Director
continues to contribute effectively to the Board and the
Board Committees of which they are a member.
As previously disclosed, and in furtherance of good
corporate governance, the Company has committed to
undertaking an externally facilitated Board evaluation
within three years of Admission (i.e. by September 2023)
and at least every three years thereafter, albeit this
Code requirement is only strictly applicable to FTSE 350
companies. The Company’s first external evaluation will
therefore take place later this year.
ESG
As detailed within the “Sustainability” section of
the Strategic Report and as set out within the 2030
Sustainability Strategy, the Group’s sustainability vision
is to act as a force for good and leave the world a better
place by using THG’s scale, partnerships, access to
capital and unique capacity for innovation to promote
and embed sustainability into everything the Group
does. In seeking to discharge its primary responsibility
under Section 172, the Board therefore not only takes
into account what may be in the best interests of
Shareholders but, recognising the responsibility which
THG owes to all its stakeholders (and with particular
regard to its commitment to act as a force for good),
also gives the appropriate consideration to wider
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Annual Report 2022
Audit Committee Report
"The Committee, together with the Risk Committee, continues to
play a leading role in ensuring the integrity of the Group’s financial
reporting, overseeing external and internal audit functions and
monitoring the Group’s controls framework. In light of proposed
corporate governance reforms, the ongoing evolution of THG’s
controls environment and oversight from the Committee remain key."
Dean Moore
Interim Chair of the Audit Committee
Members and attendance
Committee member
Dean Moore
Gillian Kent
Damian Sanders
Zillah Byng-Thorne
Dominic Murphy
Position
Chair1
Member2
Former Chair3
Former Member4
Former Member5
Attendance
1/1
1/1
6/6
5/5
1/3
1. Dean Moore was appointed as a member of the Audit Committee upon his appointment to the Board on 15 September 2022. He thereafter assumed the
position of Audit Committee Chair on an interim basis on 24 January 2023 when Damian Sanders stepped down from the Committee upon his appointment
as an Executive Director.
2. Gillian Kent was appointed as a member of the Audit Committee upon her appointment to the Board on 15 September 2022.
3. Damian Sanders stepped down as Audit Committee Chair upon his appointment as an Executive Director on 24 January 2023 and was replaced by Dean
Moore, a member of the Committee, on an interim basis.
4. Zillah Byng-Thorne stepped down from the Board and as a member of the Audit Committee on 15 September 2022.
5. Dominic Murphy stepped down from the Board and as a member of the Audit Committee on 8 June 2022.
Having been appointed interim Audit Committee Chair on
24 January 2023, I have the pleasure of introducing the Audit
Committee Report for the 2022 financial year and confirm
that, during the year, and up to the date of this Report, the
Committee has continued to discharge a key role within the
Group’s corporate governance infrastructure.
The ongoing development of the Group’s internal controls
systems (financial and otherwise) and general control
environment (including the Internal Audit function) remained
subject to rigorous oversight and, where appropriate,
challenge by the Committee during 2022 to ensure their
continued effectiveness and integrity.
It is pleasing to report that, as confirmed by the annual
Board and Board Committees’ evaluation, the Committee
continues to operate effectively and deliver against its Terms
of Reference. Further details on this evaluation, including
the means by which it was conducted, can be found in
the “Board evaluation” section of the Governance Report.
Composition and meetings
Pursuant to its Terms of Reference, members of the
Audit Committee are appointed by the Board, upon the
recommendation of the Nomination Committee and
in consultation with myself as Audit Committee Chair.
Individually members are expected to possess the skills and
experience appropriate for Audit Committee membership,
whilst collectively the Committee must have the necessary
competence (financial and otherwise) relevant to the sectors
in which the Company operates. The Terms of Reference
stipulate that the Committee must comprise at least three
independent NEDs, one of whom is, where possible,
a member of the Remuneration Committee (possessing
recent and relevant financial expertise and experience in
accounting and/or auditing (as determined by the Board))
and one of whom is a member of the Risk Committee.
At the end of the 2022 reporting period, Audit Committee
membership satisfied the relevant provisions of both the
Role and responsibilities
The Audit Committee’s Terms of Reference clarify that its
purpose is to support the Board in fulfilling its oversight
responsibilities by reviewing and monitoring: the
independence and effectiveness of internal and external
audit functions; the integrity of the Group’s financial and
narrative statements; and the Group’s internal financial and
non-financial controls and, as appropriate and in conjunction
with the Risk Committee, risk management framework.
The specific duties and responsibilities are detailed therein
and include, but are not limited to, the following:
• monitoring the integrity of the Group’s financial statements,
including its half-year financial statements, annual report
and accounts and preliminary announcements, and
reviewing and reporting to the Board on significant financial
reporting issues and judgements which those statements
contain, having regard to matters communicated to it by the
External Auditor;
• where requested by the Board, reviewing the content of
the annual report and accounts and the interim financial
statements and advising the Board on whether, when taken
as a whole, each are fair, balanced and understandable
and provide the information necessary for Shareholders
to assess the Company’s performance, business model
and strategy;
• assisting the Board with monitoring and reviewing the
Group’s internal control systems on an ongoing basis,
including monitoring material financial, operational and
compliance controls;
• monitoring and assessing the role and effectiveness of the
Internal Audit function in the overall context of the Group’s
risk management system and the work of the Compliance
and Finance functions;
• monitoring the independence, quality and effectiveness
of the external audit process; and
•
reviewing the Group’s procedures for preventing and
detecting fraud, its systems and controls for the prevention
of bribery and the adequacy and effectiveness of its
anti-money laundering systems and controls.
Terms of Reference and the Code comprising
Damian Sanders, as Audit Committee Chair, Gillian
Kent, an independent NED and Risk Committee Chair,
and myself, Dean Moore, also an independent NED and
Remuneration Committee Chair. As previously detailed,
Gillian Kent and I became members of the Audit Committee
upon our appointment to the Board on 15 September
2022, when Zillah Byng-Thorne stepped down from the
Board and certain Board Committees (including the Audit
Committee). Dominic Murphy was also a member of the
Audit Committee during the 2022 reporting period until
he stepped down from the Board on 8 June 2022.
Upon his appointment to the position of CFO on 24 January
2023 Damian Sanders stepped down as Audit Committee
Chair, and from all other Board Committee membership, at
which time I was appointed Audit Committee Chair on an
interim basis. As the Board currently comprises only two
independent NEDs, Gillian Kent and myself (excluding the
Chair), this has resulted in the non-satisfaction of the Audit
Committee membership requirements since this date. This
position is temporary and expected only to continue until
the appointment of at least one new independent NED in
the coming months which will ensure that the applicable
membership requirements are satisfied.
Whilst at least four Audit Committee meetings must take
place annually, at appropriate times in the financial reporting
and audit cycle (and as otherwise required), six Committee
meetings took place during 2022, reflecting the Committee’s
valuable role within THG’s governance framework. Member
attendance at these meetings is set out within the preceding
table and, although attendance is restricted to Committee
members (and any individual entitled to be present as
an observer), the Terms of Reference provide that certain
individuals (including the CFO, the Head of Internal Audit
and the External Auditor’s Lead Partner) shall be invited
and are expected to attend meetings on a regular basis and
may also request a meeting of the Committee should they
consider it necessary or desirable to do so. Outside these
scheduled meetings and throughout the 2022 reporting
period (and up to the date of this Report), the Audit
Committee Chair (and other Committee members where
appropriate) also maintained an ongoing dialogue with the
principal individuals involved in the Group’s governance,
including the Independent Chair, the CEO, the CFO, the
Deputy CFO, the Head of Internal Audit and the External
Auditor’s Lead Partner.
In addition to attending all Audit Committee meetings,
the External Auditor met with Audit Committee members
in the absence of Senior Management and also privately
with the Audit Committee Chair, as and when considered
necessary, to discuss the scope of the audit plan, the remit
of the external audit and to challenge, as they saw fit, the
findings of the audit process, including (but not limited to)
any material issues which had been identified, areas of
significant judgement and the general effectiveness of
the process.
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124
Annual Report 2022 Activities of the Audit Committee
As noted above, six Audit Committee meetings were convened during the 2022 reporting period, all of which
were scheduled. The main matters that the Audit Committee considered during the year are listed below:
Topic
Activity / Review
Financial reporting
• Reviewed the draft and final half-year statement, including key accounting judgements, materiality and the External
Auditor’s report on the interim statements
• Reviewed key judgements and estimates in preparation for year-end reporting
• Reviewed year-end matters including the draft Annual Report and Accounts (and assessed the processes which ensure it
is fair, balanced and understandable), significant accounting judgements, the draft and final full-year results announcement,
the going concern statement and the viability model
• Considered the impact of climate risks on the financial statements
• Review other reports and updates from management including the Group Tax Strategy, Corporate Reporting Reform, and
updates from the AQR Inspection Report
External audit
• Reviewed EY’s plan for the audit of the 2022 Annual Report and Accounts and the progress of the audit to date
• Reviewed EY’s report on the scope of the audit of the 2022 Annual Report and Accounts, including key audit risks
• Disclosed relevant audit information to the External Auditors and the required evidence in support of it
• Reviewed the final report from EY following completion of the audit of the 2022 annual report
Internal control and
assurance
• Reviewed reports from Internal Audit on assurance and audit work
• Reviewed other updates from Internal Audit including the Recommendations Tracker and Whistleblowing Updates
• Re-approved the Internal Audit annual plan on a quarterly basis
• Reviewed the outputs of the fraud risk assessment
Significant financial reporting areas
One of the roles of the Audit Committee is to assess
whether the judgements and estimates made by Senior
Management are reasonable and appropriate. In order
to assist in this evaluation, the finance team provided
accounting papers to the Audit Committee which
detailed the financial aspects surrounding key accounting
judgements and areas of focus for THG, including all
significant issues outlined in the following table. As part
of the year-end reporting process the Audit Committee
reviewed this Annual Report, the management papers
on key accounting estimates and judgements, going
concern and viability review, updates provided by the
External Auditor, accounting and reporting matters,
and management representation letters concerning
accounting and reporting matters. The Audit Committee
assessed whether suitable accounting policies had been
adopted and the reasonableness of the judgements and
estimates that had been made by Management. This
section outlines those significant issues which received
particular focus from the Audit Committee in relation to
the financial statements for the period and how these
issues were addressed.
Significant issues which arose during the reporting
period were dealt with as follows:
Area of focus
Consideration and actions taken by the Audit Committee
Revenue
recognition
Following the growth of THG Ingenuity in recent years, the key areas of management
judgement include the classification of revenue streams to the Group’s Divisions and
contract accounting within Ingenuity Commerce. The Committee were presented with
the key judgements applied by management for the Ingenuity contracts under IFRS 15.
The Committee challenged management on the judgement relating to principal or agent
recognition of different revenue streams, being one of the key judgements. Management
responded to all challenges and there was no impact on the recognition or disclosure.
Impact on financial
information and
disclosure
The revenue accounting
policy is included within
note 1c and note 2
within the Consolidated
Financial Statements.
Area of focus
Consideration and actions taken by the Audit Committee
Accounting
for platform
development costs
As a growing technology business, THG incurred £56m in respect of additions to the platform in 2022.
The carrying value at 31 December 2022 totals £100m. There is management judgement applied regarding
which projects relate to capital spend. This is reviewed on a monthly basis with Senior Management across
Finance and Technology teams.
The Committee reviewed and assessed the accounting treatment and disclosure and the application of IAS
38. The effectiveness of controls around the maintenance and tracking of platform development projects
was also considered. Management is in the process of improving controls further in this area and plan to
present a plan to the Committee alongside working with the Internal & External auditors to adopt a controls-
based audit in this area in future years.
In addition, the Committee reviewed the level of spend and carrying values of the platform compared to
peers. It was noted that THG’s platform has a lower carrying value than its peers due to this being built in
house. All items were concluded to be appropriate.
Impact on financial
information and
disclosure
Intangibles note 11
within the Consolidated
Financial Statements.
Impairment
and cash-
generating-units
Following the divisional reorganisation in the year, additional cash-generating-units (CGUs) have been
identified. The result is that six CGUs have been identified; THG Beauty; THG Nutrition; THG Ingenuity;
THG OnDemand; THG Luxury; and THG Experience. The Audit Committee reviewed management’s
conclusion of the number of CGUs in existence at the balance sheet date and agreed with the six units.
The Audit Committee reviewed management’s impairment paper in detail, challenged key judgements
including terminal growth rate, forecast growth rate and discount rates and concluded these to be
appropriate. The Committee reviewed the impairment charges recognised for THG Beauty and THG
Ingenuity and the judgements made thereon agreeing with management’s conclusion. The Committee
also approved the disclosure for inclusion within the financial statements.
The Intangible
assets note 11
is included within
the Consolidated
Financial Statements.
Presentation and
disclosure of
adjusted items
and APM’s
To allow the Committee to assess the policy, presentation and disclosure applied, Management presented
a detailed category by category analysis of adjusted items to the Committee in the year. The Committee
challenged the appropriateness of the classification of costs including those that were in relation to Covid-19.
The Committee also considered the presentation of APMs including Adjusted EBITDA from continuing
operations throughout this report and whether this enables a clear and fair understanding of performance.
The adjusted items
note 4 is included
within the Consolidated
Financial Statements.
The conclusion was that the adjusted items policy was appropriate and being applied consistently. The
Covid-19 costs that were incurred were trackable and often split separately on the face of the supplier
invoice. Management continues to review the level of these costs and do not anticipate the Covid-19 impact
to continue past H1 2023.
The Committee concluded that management had made clear announcements to the market in FY22
regarding the loss-making areas of the business under review and that showing an additional APM for those
categories that had been exited explained the impact of this to the users of the financial statements.
The Committee concluded that the use of APMs were satisfactory.
Related Party
Transactions
The Group leases a number of properties from a related party. A Related Party Committee is in place to
review and approve any transactions in the year.
The Audit Committee have reviewed the related party disclosure within the financial statements to ensure
this gives a true and fair view. This has included a review of whether there are any additional Related Parties
outside of those already identified due to Board appointments and shareholdings in the year.
Where relevant, detailed accounting papers were also shared with the Audit Committee during the year
for review.
The Audit Committee satisfied themselves that there were no additional related parties that had not
already been identified. The Audit Committee also approved the disclosure for inclusion within the financial
statements.
As noted in the 2021 Annual Report, officers of the Propco Group were also officers of the Company and
certain of its subsidiaries. Acknowledging the conflict of interest that may arise from such a position, the
decision was taken to resolve this crossover in officer appointments by 31 December 2022. The necessary
action was taken during the reporting period such that Propco Group officers are now fully independent of
the Group.
More details on related
parties are included
within the Related Parties
Committee Report.
The related parties’
details is included
within note 27 within
the Consolidated
Financial Statements.
Taskforce on
Climate-Related
Financial
Disclosures
A significant change to the annual report and accounts in 2022 is the inclusion of
TCFD. During 2022, THG formed a TCFD governance structure and process to support
compliance and disclosure. Regular updates were shared with the Committee.
In addition, the proposed disclosure was reviewed and approved by the Committee.
Task Force on
Climate-related
Financial Disclosures
(TCFD) section.
The previous table is not a complete list of all the Group’s accounting issues, judgements, estimates and
policies, but highlights the most significant ones for the period in the opinion of the Audit Committee.
125
126
Annual Report 2022
Fair, balanced and
understandable assessment
At the request of the Board and pursuant to its Terms of
Reference, the Audit Committee has considered whether,
in its opinion and when taken as a whole, the Annual
Report is fair, balanced and understandable and provides
the information necessary for Shareholders to assess THG’s
position and performance, business model and strategy.
THG has established internal controls in relation to the process
for preparing the Annual Report including the following:
•
•
•
Senior Management regularly monitors and considers
developments in accounting regulations and financial
reporting and, where appropriate, reflects developments
in the financial statements.
The document is drafted by Senior Management with
overall coordination by a member of the Finance Team
and additional support from external advisers to ensure
consistency across the relevant sections and that the
necessary information is included for shareholders to
assess the Group’s position and performance, business
model and strategy.
Comprehensive reviews of drafts of the document are
undertaken by Executive Directors, Senior Management
and external advisers as part of an internal verification
process which is undertaken to ensure accuracy and
to assess whether the document is fair, balanced and
understandable.
•
The final draft of the document is reviewed by the Audit
Committee prior to consideration by the Board.
Following its review, the Audit Committee advised the
Board that the Annual Report was, when taken as a whole,
considered to be fair, balanced and understandable and
provided the information necessary for Shareholders to
assess THG’s position and performance, business model
and strategy. The Audit Committee was also satisfied
that suitable accounting policies have been adopted and
appropriate disclosures made in the financial statements.
The Viability and Going Concern Statements are set out
on pages 93-95 of the Strategic Report.
Risk management and
internal controls
In accordance with the Code ultimate responsibility for the
Group’s systems of internal controls and risk management
framework rests with the Board. However, pursuant to
the provisions of the Code and as reflected in its Terms of
Reference, the Audit Committee has delegated responsibility
for the ongoing monitoring and review of the Group’s internal
control systems, including its financial, operational and
compliance controls, while assisting the Board in its annual
review of the effectiveness of these systems and determining
their adequacy (or otherwise).
127
During the year, the Committee considered the UK
Government’s consultation on ‘Restoring Trust in Audit
and Corporate Governance’ and reviewed management’s
strategy for delivering the necessary control framework
enhancements.
The Audit Committee continues to work in support of the
Board’s risk management strategy and in conjunction with
the Risk Committee as and when it is considered appropriate
to do so. Information on the Group’s risk management
framework can be found on pages 83-86 of the Strategic
Report, together with details of the processes and controls
which were in place throughout the reporting period to
manage and mitigate risk and provide the Board with the
required assurance that sound systems of risk management
and internal controls exist throughout the Group.
Internal Audit
The Audit Committee is responsible for reviewing and
approving the role and mandate of the Internal Audit
function while monitoring and assessing the effectiveness
of its work, including in the overall context of the Group’s
risk management systems. To ensure the reporting
line of the Internal Audit function is independent of the
Executive Leadership Team and is suitably positioned
to exercise independent judgement, it has access to the
Audit Committee as and when necessary, and the Head
of Internal Audit has a direct reporting line into the Audit
Committee Chair. Further, the Audit Committee regularly
meets with the Head of Internal Audit, in the absence
of Senior Management, to discuss the effectiveness of
the function and to consider the actions taken by Senior
Management to implement its recommendations and
support its workings.
Internal Audit plans include a range of financial and
non-financial engagements, delivered in an assurance or
advisory capacity. The Internal Audit plan is risk-based
and due consideration is given to each of the following
areas during the planning process; principal risks; key
divisions and central functions; cyber; ESG; projects and
M&A; global site audits; operations and commerce. Audit
engagements were undertaken in each of these areas
during 2022.
The annual internal audit plan is subject to detailed review
by the Audit Committee to ensure alignment with key
business needs; regular progress updates are provided to
the Committee which oversees and approves the scope of
the internal audit plan on a quarterly basis. Following due
and careful consideration of all relevant factors, the Audit
Committee is satisfied that the Internal Audit function is
equipped to properly and effectively discharge its duties
and responsibilities in accordance with the relevant
professional standards for internal auditors and that the
internal audit plan itself provides appropriate assurances
in respect of the financial and non-financial controls in
place to manage and mitigate the principal and emerging
risks facing the business (further details of which can be
found on pages 87-93).
The Audit Committee is also responsible for considering
and approving the terms of engagement and remuneration
of the External Auditor for both audit and non-audit
services, and removal of the External Auditor. A resolution
to propose the re-appointment of EY was approved by
Shareholders at the 2022 AGM. When considering whether
to recommend the reappointment of the External Auditor,
the Committee considers a range of factors, including
the effectiveness of the external audit, the period since
the last audit tender was conducted, and the ongoing
independence and objectivity of the External Auditor.
The lead audit partner, Karl Havers, has been in post since
the start of the audit for the 2021 reporting period. Whilst
the Audit Committee is aware that the initial engagement
period for a statutory auditor should not exceed 10 years,
the Company tenure is counted from 1 January 2021 (the
first accounting period audited following Admission). The
Audit Committee considers that it would be appropriate
to conduct an external audit tender by no later than 2030.
The External Auditor has been appointed since the 2011
reporting period to the date of this Annual Report.
Fees payable to the External Auditor
The Audit Committee has reviewed and approved a policy
regarding non-audit work and fees, in relation to which
please see Note 5 of the Group’s financial statements.
In order to ensure that the provision of non-audit services
does not impair the External Auditor’s independence or
objectivity, this policy requires that the Audit Committee
pre-authorises any non-audit work proposed to be
undertaken by the External Auditor or, if required
urgently between meetings, the Chair of the Audit
Committee is empowered to provide such authorisation.
There are certain services which cannot be provided
by the External Auditor or members of its network without
the possibility of its independence being compromised;
it is not therefore permissible for the External Auditor to
provide such services. Non-audit services prohibited under
independence requirements will not be authorised.
The only non-audit services performed in the year related
to the interim procedures in accordance with International
Standard for Review Engagements (UK and Ireland) 2410.
The total fees were £0.1m being a 1:23 ratio to the audit
fee. It is widely accepted that such procedures would be
completed by the Group’s auditor. The Committee have
therefore concluded the objectivity and independence
of the external auditor is safeguarded.
Independence, performance and
effectiveness of External Auditor
The External Auditor confirmed its independence and
objectivity from THG during the 2022 reporting period and
both the Audit Committee and the Board are satisfied that
the External Auditor has adequate policies and safeguards
in place to ensure its objectivity and independence is
maintained. When assessing the independence of the
External Auditor, the Audit Committee considered, amongst
other things, the value of non-audit fees provided by the
External Auditor, the relationship with the External Auditor
as a whole and the annual disclosure from the External
Auditor to discuss the threats to its independence and the
safeguards applied to mitigate those threats.
In overseeing the External Auditor relationship,
the Audit Committee is responsible for making formal
recommendations to the Board on its appointment,
reappointment and removal, and in this regard seeks
views from Senior Management on the quality and
effectiveness of the external audit process.
The effectiveness of the Lead Partner, the audit team, their
approach to audits, including planning and execution,
communication, support and value were assessed and
discussed, and consideration given to whether the External
Auditor had achieved the agreed audit plan or otherwise
explained the reasons for any departures from it, including
any changes in perceived audit risks and the work
undertaken by the External Auditor to address those risks.
The content of the External Auditor’s Board report
was also reviewed and monitored, together with other
communications with the Audit Committee, in order to
assess whether there was a good understanding of THG’s
business, and establish whether recommendations had
been acted upon and, if not, the reasons why. As part of the
assessment of the External Auditor, the Audit Committee
considered whether it had exercised professional
skepticism and an appropriate degree of challenge to
Senior Management, particularly on key accounting and
audit judgements.
Additional feedback was sought from various participants in
the process (primarily the Audit Committee itself, the CFO,
the Chair and CEO).
Overall, the effectiveness of the external audit process was
assessed as performing as expected. The Audit Committee
concluded it was satisfied with the work undertaken by the
External Auditor, including adequate levels of challenge,
during the reporting period.
There are independent reporting lines from the External
Auditor to the Committee and the External Auditor is
afforded the opportunity for sessions with the committee
throughout the year.
128
Annual Report 2022 Focus for 2023
During the current financial year, the Audit Committee
will continue to:
• Oversee the controls and governance of any changes
in THG to ensure the continued effectiveness and
integrity of THG’s systems of internal controls and
development of THG’s Internal Audit function
as THG continues to grow and mature
•
Play a key role in understanding the UK Government’s
‘Restoring Trust in Audit and Corporate Governance’
reforms when they are published and subsequently
monitoring the progress of the proposed control
framework enhancements
• Oversee the evolution of the organisation’s control
environment and the use of technology to enhance
the operation of controls and harness potential
opportunities to digitalise and automate controls
as the framework matures further
On behalf of the Audit Committee
•
Ensure the provision of training, development and
support is relevant to all Directors and the Executive
Leadership Team, particularly with respect to
applicable new legislation, regulation and guidance
Dean Moore
Interim Chair of the Audit Committee
17 April 2023
Risk Committee Report
“The Committee, together with the Audit Committee,
continues to play a key role in governing THG’s risk
management and internal controls. This oversight is
increasingly important, keeping pace with the dynamic
nature of change, both within THG and the external
economic environment. "
Gillian Kent
Chair of the Risk Committee
Members and attendance
Committee member
Gillian Kent
Dean Moore
Damian Sanders
Zillah Byng-Thorne
Dominic Murphy
Position
Chair¹
Member²
Former Member3
Former Chair¹
Former Member4
Attendance
2/2
n/a
4/4
2/2
0/1
1. Zillah Byng-Thorne stepped down from the Board and as Risk Committee Chair on 15 September 2022 and was replaced by Gillian Kent who was
appointed to the Board with effect from this date.
2. Dean Moore was appointed as a member of the Risk Committee on 6 December 2022.
3. Damian Sanders stepped down as a member of the Risk Committee upon his appointment as an Executive Director on 24 January 2023.
4. Dominic Murphy stepped down from the Board and as a member of the Risk Committee on 8 June 2022.
Having been appointed as Chair of the Risk Committee
upon joining the Board in September 2022, I am pleased
to introduce the Risk Committee Report for the financial
year ending 31 December 2022.
The Risk Committee was established to ensure an
appropriate framework exists within the Group for robust
and effective risk oversight and governance and this is
reflected within the Committee’s Terms of Reference which
align with current market practice (including in respect
of the Committee’s scope of responsibilities and duties).
The Committee, as confirmed by the annual Board and
Board Committees’ evaluation, continues to operate
effectively and deliver against its Terms of Reference.
Further details on this evaluation, including how it was
conducted, can be found in the “Board evaluation”
section of the Governance Report.
Composition and meetings
As detailed within the Terms of Reference, members of
the Risk Committee are appointed by the Board, upon
the recommendation of the Nomination Committee and
in consultation with myself, as Risk Committee Chair.
The Terms of Reference provide that the Committee is
composed of at least three independent NEDs, one of
whom is a member of the Audit Committee, with the
quorum for any Committee meeting being any two of
its members. Whilst, collectively, the Risk Committee
must possess the necessary competence (risk, financial
and otherwise) relevant to the sectors in which the
Company operates, individual members are also
expected to have the requisite skills and experience
appropriate to such membership.
129
130
Annual Report 2022
As disclosed in the 2021 Annual Report, the Risk
Committee is also responsible for approving the role and
mandate of the Group Risk function and monitoring and
assessing the effectiveness of its work, including in the
overall context of the Group’s risk management systems.
The CRO has always open and direct access to the Risk
Committee, an arrangement which is viewed as key in
maintaining the independence of the CRO and Group Risk
reporting line from that of the Executive Leadership Team.
As required under the Terms of Reference, arrangements
are in place to ensure that the Risk Committee has
sufficient resources at its disposal to allow it to properly
and effectively discharge its duties and responsibilities
including, if considered appropriate, the ability to seek
specialist input and expertise from external advisors.
Activities of the Risk Committee
As detailed above, four Risk Committee meetings took
place during the reporting period and, as was the case
during the 2021 financial year, both Risk Committee Chairs
continued to meet with the CRO on a one-to-one basis
to discuss the ongoing development, refinement and
embedding of the Group’s risk management framework
and associated processes.
A summary of the key activities undertaken by the
Committee during the 2022 financial year is as follows:
•
•
•
•
•
•
Received and challenged scheduled risk updates
outlining both the principal risks and any escalated
operational risks. The Committee also received detail
of escalated sub-risks as well as the outcome of
principal risk ‘deep dives’
Consideration of the ongoing evolvement of group
and principal risk appetites and consideration of
emerging risks
Consideration of the role of THG Insurance
in supporting risk mitigation activities
Received and challenged the ongoing refresh of the
principal risks and their continuing relevance and
alignment to the business
Review of the results and remedial actions arising
from the annual Fraud Risk Assessment and any
summary reports of escalated incidents and instances
of fraud
Consideration of the potential impact of the UK
Government’s consultation on ‘Restoring Trust in Audit
and Corporate Governance’ upon both the committee
and the wider group risk management framework
At the end of the 2022 reporting period, Committee
membership satisfied the relevant provisions of the Terms of
Reference comprising Gillian Kent, as Risk Committee Chair,
Damian Sanders, a former independent NED and former
Audit Committee Chair, and Dean Moore, also an independent
NED and Remuneration Committee Chair. As detailed above,
Gillian Kent became a member of the Committee upon her
appointment to the Board on 15 September 2022, replacing
Zillah Byng-Thorne as Committee Chair, and Dean Moore was
appointed to the Committee on 6 December 2022. Dominic
Murphy was also a member of the Committee during the 2022
reporting period until he stepped down from the Board on 8
June 2022. Upon his appointment to the position of CFO on 24
January 2023, Damian Sanders stepped down as a member
of the Risk Committee and from all other Board Committees.
As the Board currently comprises only two independent
NEDs, Gillian Kent and Dean Moore (excluding the Chair), this
has resulted in the non-satisfaction of the Risk Committee’s
membership requirements since this date. This position is
temporary and expected only to continue until the appointment
of at least one new independent NED in the coming
months which will ensure that the applicable membership
requirements are satisfied.
At least four Risk Committee meetings must be held annually,
at appropriate times in the financial reporting and audit cycle
(and as otherwise required), and any Risk Committee member,
the Chief Risk Officer (CRO) or the Head of Internal Audit
may request a meeting of the Committee if they consider
it necessary or desirable to do so. In accordance with the
Terms of Reference and as can be seen from the preceding
attendance table, four meetings of the Risk Committee took
place during the financial year under review, all of which were
scheduled. Whilst only members of the Committee (and any
individual entitled to be present as an observer) have the right
to attend Committee meetings, typically the CFO, Deputy CFO,
CRO and the Head of Internal Audit will also be in attendance,
together with the External Auditor.
Roles and responsibilities
The Risk Committee’s Terms of Reference detail the specific
duties and responsibilities of the Committee and clarify that
its purpose is to not only assist the Board in its oversight
of risk throughout the Group and advise on its overall risk
appetite, tolerance and strategy (including the principal and
emerging risks it may be willing to accept to achieve its
long-term strategic objectives) but to review and monitor:
the principal risks and identify the emerging risks
facing the Group, the likelihood and impact of such
risks materialising and the way in which such risks
are managed and mitigated (including the definition
and execution of a risk management strategy and
associated risk policies); and
the robustness of the Group’s risk management
framework, policies and procedures and their fitness
for purpose when tested against the Board’s risk
strategy and appetite.
•
•
131
Additionally, throughout the reporting period and pursuant
to the Terms of Reference, the Risk Committee Chairs,
together with other Committee members (to the extent
appropriate), remained in ongoing dialogue with key
individuals involved in the Group’s governance, including
the Chair, the CRO and the Head of Internal Audit, to
ensure the necessary intra-functional transparency
and alignment.
Risk management
and internal controls
In accordance with the FRC’s Guidance on “Risk
Management, Internal Control and Related Financial
and Business Reporting” (September 2014), ultimate
responsibility for the Group’s systems of internal controls
and risk management framework rests with the Board.
However, pursuant to the provisions of the Code and
as reflected in its Terms of Reference, the Risk Committee,
along with the Audit Committee, has delegated responsibility
for the ongoing monitoring and review of the Group’s risk
management and internal control systems, including its
financial, operational and compliance controls.
The Committees have also delegated responsibility for
monitoring and review of the processes and procedures in
place to manage or mitigate principal risks and to identify
emerging risks and review and assess the Company’s risk
appetite and associated stress testing whilst assisting the
Board in its annual review of the effectiveness of these
systems and determining their adequacy (or otherwise).
Information on the Group’s risk management framework
can be found on pages 83-93 of the Strategic Report,
together with details of the processes and controls which
were in place throughout the reporting period to manage
and mitigate risk and provide the Board with the required
assurance that sound systems of risk management and
internal controls exist throughout the Group.
The Viability Statement is set out on pages 93-95
of the Strategic Report.
Focus for 2023
During the current financial year it is anticipated that key
areas of focus for the Risk Committee will be as follows:
• Oversee the management and reporting of principal
and operational risks and the application of our
risk appetite
• Monitor the identification and quantification
of emerging risks and the business response
•
Receive updates, as applicable to risk, on the key
elements of the UK Government consultation on
proposed audit and corporate governance reforms
On behalf of the Risk Committee
Gillian Kent
Chair of the Risk Committee
17 April 2023
132
Annual Report 2022
Role and responsibilities
To ensure it is well-placed to execute its principal
functions within the Group’s governance infrastructure,
the Nomination Committee’s Terms of Reference
incorporate the salient elements of the Code in
respect of Board appointments, orderly succession
planning and the oversight of a diverse succession
pipeline. Stated duties and responsibilities which
were considered and discharged, as appropriate,
throughout the 2022 reporting period included:
•
•
•
as noted above, the ongoing review of the
structure, size and composition (including the
skills, knowledge, experience and diversity)
of the Board and identifying and nominating
potential Board appointees as required;
recommending suitable SID candidates to the
Board (discussed in further detail in the “Board
composition” section which follows); and
reviewing Board and Senior Management succession
plans, taking into account both the challenges
and opportunities facing the Group and the skills,
experience and knowledge required within the
Company and the Board to effectively manage
and exploit such challenges and opportunities.
To ensure that suitable and timely Board and Senior
Management appointments are made, the Terms
of Reference expressly provide that the Nomination
Committee must remain abreast of strategic and
commercial issues affecting the Group and the markets
within which it operates. Accordingly, in addition to the
Board strategy session which took place in November 2022
following the appointment of the new independent NEDs,
Gillian Kent and Dean Moore, commercial knowledge
and insights were shared with all Board members on
an ongoing basis through the provision of strategic and
market updates at scheduled monthly Board meetings.
Composition and meetings
Reflecting the equivalent Code Provision, the Nomination
Committee’s Terms of Reference provide that a majority
of its members must be NEDs who are independent in
character and judgement and free from any relationships
or circumstances which are likely, or could appear, to affect
their judgement. They further provide that the Nomination
Committee Chair should be either the chair of the Board
or an independent NED. Membership of the Committee,
as set out in the preceding table, therefore aligns with
these requirements, with the Nomination Committee
Chair, Charles Allen, and Gillian Kent both deemed to be
independent upon appointment to the Board during 2022
(and as detailed within the “Board independence” section
of the Governance Report). Biographies of all Nomination
Committee members can be found on pages 108-110
of the Governance Report.
Whilst the Terms of Reference provide that at least two
Nomination Committee meetings must be held annually,
additional meetings may take place as either required by
the Nomination Committee Chair or as requested by any
Committee member should they consider it necessary and,
although attendance is restricted to Committee members,
others may be invited if considered appropriate and
necessary e.g. the CEO and/or external advisers. During the
2022 reporting period, four scheduled meetings took place
with two additional meetings convened to consider certain
changes to Board composition and the Board recruitment
process more generally.
Nomination Committee Report
“The Nomination Committee remains committed to ensuring that the Company’s
leadership is, at all times, appropriately constituted to oversee THG’s continued
growth and deliver on its value creation plans. Further independent NED
appointments are therefore expected during 2023 as we continue to enhance
and strengthen the Group’s governance standards and infrastructure.”
Charles Allen,
Lord Allen of Kensington CBE
Chair of the Nomination Committee
Members and attendance
Co mmittee member
Charles Allen
Iain McDonald
Gillian Kent
Zillah Byng-Thorne
Dominic Murphy
Position
Chair¹
Member
Member²
Former Member³
Former Chair⁴
Attendance
2/2
6/6
1/1
5/5
4/4
1. Charles Allen was appointed Nomination Committee Chair on 10 June 2022.
2. Gillian Kent was appointed to the Nomination Committee upon her appointment to the Board on 15 September 2022.
3. Zillah Byng-Thorne stepped down from the Board and as a member of the Nomination Committee on 15 September 2022.
4. Dominic Murphy stepped down from the Board and as Nomination Committee Chair on 8 June 2022.
Having been appointed as Nomination Committee Chair in
June 2022, I would like to welcome you to the Nomination
Committee Report for the 2022 financial year and convey
my gratitude to my predecessor, Dominic Murphy, for his
strong leadership of the Committee since the IPO and
to Zillah Byng-Thorne for her contribution as a
Committee member.
As we indicated in the 2021 Annual Report, Board
composition was expected to be a key focus throughout
2022 and, pleasingly, significant progress was made
in this regard. Acknowledging my mandate to improve
independence and diversity and heedful of the Committee’s
responsibility to keep the structure, size and make-up of
the Board under ongoing review, a successful recruitment
process was undertaken which resulted in the appointment
of two independent NEDs during the year with certain
Executive Director changes also taking place in January
2023 (further information on which follows).
The Nomination Committee nonetheless remains mindful of
Code Provision 11, discussed in detail within the “Corporate
Governance Statement” section of the Governance Report;
in conjunction with the Board, the Committee will continue
to seek alignment with this Code Provision as a matter of
priority during 2023 and having regard to, amongst other
things, the FCA’s D&I targets (as incorporated within
Listing Rule 14.3.33R) and the need to ensure the necessary
succession plans are in place and the Company’s
leadership is, at all times, properly constituted to oversee
the delivery of the Group’s strategic aims and objectives.
In recommending any potential appointee, the Nomination
Committee recognises the importance of promoting diverse
and inclusive Board membership, but always comprising
individuals who are considered the ‘right THG fit’, and, in
line with the relevant Code Provision, appointments will
continue to be made on the basis of merit with potential
appointees assessed against objective criteria.
133
134
Annual Report 2022 Activities of the Nomination Committee
Board composition
As disclosed in the 2021 Annual Report, a review of the
Group’s corporate governance arrangements identified
the need for an independent chair and Russell Reynolds
Associates, an independent search consultant, was formally
appointed to assist with the recruitment process. The
search for a suitable candidate was launched in the 2021
reporting period and culminated in the appointment of
Charles Allen as Independent Chair on 22 March 2022.
As further disclosed within the 2021 Annual Report, in
recommending Charles Allen to the Board the Nomination
Committee had given robust consideration to candidate
shortlists and engaged in significant deliberations
around, for example, relevant experience, knowledge
and skillsets and whether shortlisted candidates could
be viewed as the ‘right THG fit’. Face-to-face interviews
with shortlisted candidates were undertaken by members
of the Nomination Committee, and other NEDs and
members of Senior Management participated in the
process to the extent considered appropriate.
In light of the Independent Chair’s mandate to, amongst
other things, enhance governance and transparency
and refresh and strengthen the Board by improving
its independence and diversity, Board composition
remained an ongoing focus of the Nomination Committee
throughout 2022. Noting that two former independent
NEDs, Tiffany Hall and Dominic Murphy, stepped down
from the Board in the first half of the year, particular
consideration was given to overall independence
and the balance of Executive Directors / NEDs.
Leading recruitment consultancy firm Axon Moore was
engaged by the Company to assist in the search for
suitable independent NEDs, with a mandated brief which
acknowledged the benefits which a diverse Board could
bring and which sought to identify suitably skilled and
experienced candidates who aligned culturally with the
organisation. The executive chair and co-founder of Axon
Moore is David Moore, a founder investor in the Company.
Aside from this connection, Axon Moore has no other
connections with the Company or individual Directors.
Following an initial desk search and database review,
Axon Moore produced a longlist of potential appointees
which they subsequently refined to a shortlist following
an extended interview process. At the same time, the
Nomination Committee also drew up a shortlist of
potential appointees, comprising individuals who had
been recommended from the professional networks of
the independent NEDs, and thereafter members of the
Nomination Committee, wider Board and, as required,
Senior Management participated in interviews with
candidates from both the external and internal shortlists.
As with the process to appoint the Independent Chair,
relevant experience, knowledge and skillsets were
considered key factors in identifying potential appointees
135
who were the ‘right THG fit’ and, following detailed
discussions, the Nomination Committee recommended
both Gillian Kent and Dean Moore as independent
NEDs. In line with the relevant provisions of both the
Code and the Committee’s Terms of Reference, Gillian
Kent and Dean Moore were appointed, following
Board approval, on 15 September 2022 on the basis of
merit and as assessed against objective criteria, due
regard being had to the benefits of a diverse Board
(including with respect to gender). As noted in the
Governance Report, both of these NEDs possess
extensive sector-specific and PLC experience and
have demonstrable track records in business growth -
their knowledge and insight are considered invaluable
as the Company seeks to develop and refine the
strategic drivers underpinning THG's future growth.
At the same time as Gillian Kent and Dean Moore were
appointed to the Board, Zillah Byng-Thorne, former
SID, stepped down from the Board together with NED
Andreas Hansson. Pursuant to its Terms of Reference,
the Nomination Committee was therefore required to
consider suitable candidates for the role of SID, with
reference to the then-current composition of the Board
and the balance of Executive Directors / NEDs. Following
detailed consideration, Damian Sanders was identified
as a suitable candidate for the role of SID and his
appointment was approved on an interim basis as the
Company continued to monitor and reshape its leadership
to ensure it was properly constituted to drive long-term,
sustainable growth and Shareholder value creation.
As a result of this ongoing review of THG’s leadership
needs and the balance of skills, knowledge and experience
on the Board, the Nomination Committee thereafter
recommended certain changes to the Executive Leadership
Team – specifically, that independent NED Damian
Sanders assume the role of CFO and John Gallemore,
the incumbent CFO, remain an Executive Director and be
appointed to the newly-created, stand-alone role of COO.
In light of the scale and pace of the Group’s international
growth since IPO, the role of COO is now viewed as
integral in developing and driving THG’s global fulfilment
footprint and the implementation of such changes would
allow John Gallemore, who had been covering both the
Finance and Operations functions, to focus solely on the
latter and continue to evolve and strengthen the Divisional
commercial and operating models. Further, the Nomination
Committee considered that Damian Sanders was ideally
placed to assume the role of CFO having acquired an
in-depth understanding of the Group, its People and its
culture during his two-year tenure as an independent NED,
including serving as interim SID, Audit Committee Chair
and chair of the Divisional Reorganisation Committee, and
also playing a key role in the internal reorganisation of the
Group’s principal trading Divisions during 2021/2022.
In assuming the CFO position, Damian Sanders would
simultaneously step down as interim SID and as chair and
a member of certain Board Committees. Accordingly, upon
reviewing Board composition and the balance of Executive
Directors / NEDs, the Nomination Committee agreed that
Dean Moore was a suitable candidate for the position of
SID and recommended his appointment, also on an interim
basis and until such times as a suitable long-term candidate
was identified (with reference to future independent
NED appointments). The Nomination Committee’s
recommendations were duly considered and approved
by the Board and took effect from 24 January 2023.
As also required under its Terms of Reference, the Nomination
Committee considered Board composition and the
performance of individual Directors in advance of the 2022
AGM and, following the requisite deliberations, recommended
to the Board that all Directors be put forward for annual
election or re-election (as appropriate) by Shareholders.
Board Committee composition
Board Committee membership was updated at various
points during 2022 to reflect the NED changes which took
place throughout the year and, as mandated, the Nomination
Committee was responsible for making recommendations to
the Board in respect of such membership (where appropriate,
following consultation with the relevant Board Committee
Chair). In making such recommendations, which were ultimately
accepted and implemented by the Board, the Nomination
Committee took into account not only the specific skillsets and
experience of individual NEDs but also the time commitment
expected of them and their external commitments.
The Board Committee changes which took place during
2022 are detailed within the respective Board Committee
Reports on pages 123-157, together with current Board
Committee composition, but key changes included the
appointments of Gillian Kent and Dean Moore to, respectively,
Risk Committee Chair and Remuneration Committee Chair
upon their appointments to the Board on 15 September 2022
and, following Damian Sanders’ appointment to CFO, Dean
Moore’s appointment to interim Audit Committee Chair and
Related Party Committee Chair on 24 January 2023.
As the Board currently comprises only two independent
NEDs, Gillian Kent and Dean Moore (excluding the Chair),
this has resulted in the non-satisfaction of the membership
requirements of the Audit Committee and the Risk Committee
since the date of Damian Sanders’ appointment as an
Executive Director. This position is temporary and expected
only to continue until the appointment of at least one new
independent NED in the coming months which will ensure
that the applicable membership requirements are satisfied
under the Code and the Terms of Reference of these Board
Committees. Throughout 2023 the Nomination Committee,
in conjunction with the wider Board, will continue its search
for additional independent NEDs to further enhance the
composition and diversity of the Board and establish
a robust succession pipeline.
Board evaluation
The annual Board evaluation is considered a vital corporate
governance tool which serves to both enhance Board
effectiveness and maximise Company/Group performance.
In recognition of this, and whilst only strictly applicable to
FTSE 350 companies, the Company previously committed
to undertaking an externally facilitated review within three
years of Admission, in addition to conducting the annual
performance evaluation of the Board, the Board Committees,
the Independent Chair and individual Directors.
The Company engaged a third party during 2021 to provide an
online digital platform through which it undertook a formal and
rigorous Board evaluation in the first quarter of 2022 (the “2021
evaluation”). The 2021 evaluation was aligned with best market
practice and the content tailored, as appropriate, to the particular
requirements of the Company, with specific reference to Matthew
Moulding’s then-dual role of Company chair and CEO. The
decision was taken to continue to utilise this platform for Board
evaluation purposes and a second evaluation took place at the
end of the 2022 reporting period (the “2022 evaluation”). Whilst
the content of the 2022 evaluation was substantially similar
to the 2021 evaluation, the principal differences related to the
appointment of the Independent Chair during 2022 and the clear
division of responsibility established between the leadership
of the Board and the executive leadership of the business.
An area highlighted for consideration in the 2021 evaluation
related to the form and content of monthly Board meetings.
Whilst this is considered in more detail within the “Board
meetings and activities” section of the Governance Report on
pages 105-122, changes effected during the course of 2022 to
address evaluation feedback included streamlining Board pack
content and the standard Board agenda, Senior Management
presenting on a “taken as read” basis and, in line with the
Company’s ongoing PLC transition, the introduction of regular
“deep dives” into key Divisional and/or Group topics on which
Directors have requested further insight/discussion.
Whilst the 2022 evaluation outcomes remain subject to
consideration at the date of this Annual Report, Board meeting
form and content again appear as a theme; for example,
suggestions include an increased focus in Board discussions
on Group strategy and the evolution of the business model and
the further refinement of Board packs from an operational and
financial reporting perspective. Improved scoring is evident in
areas of the 2022 evaluation relating to value creation and
strategy, albeit macroeconomic conditions are recognised
as having impacted strategy delivery during the year.
136
Annual Report 2022
Board meetings to provide regular on-topic updates.
Further and as previously discussed within this Annual
Report, the Group launched its new D&I Strategy during
2022 with the objective of building upon its approach to
D&I at every level within the organisation and becoming
an industry pioneer in driving social change. It is anticipated
that the Group’s D&I Committee, founded as a platform
through which to improve the employee journey and
establish a truly inclusive Group environment, will be
instrumental in driving the progression of the Strategy
throughout the organisation.
Further information on the Group’s approach to D&I,
including strategy, associated objectives and related
employee initiatives, is contained within the Governance
Report and in the “Empowering people and communities”
section of the Strategic Report. The diversity disclosures
required pursuant to section 414C of the Companies
Act can be found within the “Our people” section of the
Strategic Report.
AGM
As in previous years, the Nomination Committee is
scheduled to convene ahead of the AGM to review overall
Board composition and, pursuant to its Terms of Reference,
the continuation (or otherwise) of individual Directors, with
reference to their performance and ability to contribute to
the Board in light of the knowledge, skills and experience
required. Following due and careful consideration of all
relevant factors, including (but not limited to) the time
committed to discharge the responsibilities incumbent
upon them as Directors, the Committee will make its
recommendations as to whether Directors should be
put forward for election or re-election (as appropriate)
by Shareholders.
On behalf of the Nomination Committee
Charles Allen,
Lord Allen of Kensington CBE
Chair of the Nomination Committee
17 April 2023
The 2022 evaluation outcomes in respect of the Independent
Chair are reflective of the feedback generated through the
annual SID-led appraisal which took place amongst the
NEDs at the end of 2022; the strong experience, commercial
knowledge and facilitative and inclusive manner of the
Independent Chair were acknowledged in both the NEDs’
discussion and the 2022 evaluation, together with the
governance improvements implemented during their tenure
to date. Notably, certain of the 2022 evaluation outcomes
specifically acknowledge that the Board is in transition and
suggest it could be enhanced by increased diversity and
the addition of particular skillsets (e.g. e-commerce and/or
technology), thus aligning with the Nomination Committee’s
key recruitment priorities.
Diversity and inclusion
Pursuant to its Terms of Reference the Nomination
Committee must ensure that the promotion of diversity,
including (but not limited to) diversity of gender and
social and ethnic backgrounds, is a key consideration
when reviewing leadership appointments and succession
planning and, in conjunction with the People team, is
expected to take an active role in setting and monitoring
Group diversity objectives and strategies. Indeed, the
Nomination Committee recognises and embraces
the benefits attendant in a diverse Board (and Senior
Management) membership and, to the extent practicable
and appropriate, is committed to building upon the Group’s
robust commitment in this area. This is evidenced by the
aforementioned NED recruitment brief, the parameters
of which not only recognise the need to identify suitably
skilled and experienced candidates but also take into
account the FCA’s D&I targets (as incorporated within
Listing Rule 14.3.33R). Whilst the search for independent
NEDs remains ongoing, challenges have been encountered
to date identifying suitable candidates who also satisfy
the diversity criteria.
More generally, as a Disability Confident Committed
employer, the Company must ensure that its recruitment
processes are inclusive and accessible, including any
recruitment activity undertaken from a Board and Senior
Management perspective. Recruitment will therefore
continue on a meritocratic basis and founded on the principle
of fairness for all and with due regard to the D&I targets
contained within the 2030 Sustainability Strategy, further
details on which are contained in the “Sustainability” section
of the Strategic Report on pages 71-73. Key strategic targets
under THG x Planet Earth include achieving 50% female
representation and at least 15% ethnic minority representation
on the Board and in Senior Management by 2030.
To ensure the Nomination Committee (and the Board
collectively) remains suitably apprised of material People
issues (including D&I items) to allow it to effectively
discharge the responsibilities incumbent upon it, the Group
Talent Director, who has ultimate oversight of, amongst
other things, general workforce diversity, attends scheduled
Related Party Committee Report
“The Related Party Committee ensures that strong
governance is in place and that any transactions
classified as a ‘Related Party Transaction’ are approved.
The key objective is shareholder value protection.”
Dean Moore
Chair of the Related Party Committee
Members and attendance
Co mmittee member
Dean Moore
Gillian Kent
Damian Sanders
Zillah Byng-Thorne
Position
Chair1
Member2
Former Chair 3
Member4
Attendance
1/1
n/a
6/6
5/5
1. Dean Moore was appointed a member of the Related Party Committee upon his appointment to the Board on 15 September 2022. He thereafter assumed
the position of Related Party Committee Chair on 24 January 2023 when Damian Sanders stepped down upon his appointment as an Executive Director.
2. Gillian Kent was appointed a member of the Related Party Committee on 24 January 2023.
3. Damian Sanders, previously a member of the Related Party Committee, assumed the position of Chair on 15 September 2022 when Zillah Byng-Thorne
stepped down from the Board and as Related Party Committee Chair. He thereafter stepped down as Related Party Committee Chair upon his appointment
as an Executive Director on 24 January 2023 and was replaced by Dean Moore, a member of the Committee and interim SID.
4. Zillah Byng-Thorne stepped down from the Board and as Related Party Committee Chair on 15 September 2022 and was replaced by Damian Sanders,
a member of the Committee and the then interim SID.
I have pleasure in introducing the Related Party Committee
Report for the 2022 financial year. Having been appointed
as Committee Chair earlier this year, I would like to take
this opportunity to restate the Committee’s commitment to
ensuring that all Related Party Transactions remain subject
to robust evaluation prior to approval (or otherwise) and
to confirm that the requisite governance arrangements are
in place to allow for the full and effective oversight of both
existing and potential conflicts of interest.
As disclosed in previous Annual Reports, prior to Admission
to the London Stock Exchange, THG divested the Propco
Group, which owns property assets occupied and utilised
by the Company and its operating businesses. As the
Propco Group is wholly owned by Matthew Moulding,
the CEO and a major shareholder in the Company, the
divestment was overseen and approved by the independent
NEDs to ensure both actual and potential conflicts
of interest arising from the transaction were properly
managed and resolved. Whilst the lease arrangements
which operated between the Propco Group and THG and
its operating businesses prior to the Propco Transaction
were unchanged by the divestment in 2020 and continue to
remain in place, certain changes took place during the 2022
reporting period which are explained in further detail below.
137
138
Annual Report 2022
Composition and meetings
In recognition of the Related Party Committee’s key
governance function, its Terms of Reference provide that
members must be independent NEDs who are appointed
by the Board upon the recommendation of the Nomination
Committee (and in consultation with myself as Committee
Chair). Current Committee membership is set out in
the preceding attendance table and, as noted above,
I assumed the position of Committee Chair when Damian
Sanders stepped down from the Committee following his
appointment as an Executive Director in January 2023.
The Terms of Reference provide that meetings of the
Related Party Committee are held at such times as the
Committee Chair requires, although any member of the
Committee may request a meeting if they consider it
necessary. As can also be seen from the attendance table,
six meetings of the Related Party Committee took place
during the 2022 financial year, in February, March, two
meetings in May, August and October, at which certain
salient matters were subject to detailed consideration
(please refer to the section below entitled “Activities
of the Related Party Committee”). Whilst only members
are entitled to attend Committee meetings, the Terms
of Reference provide that others, including external
advisers, may attend by invitation when considered
necessary and appropriate.
Role and responsibilities
As detailed within its Terms of Reference, the key function
of the Related Party Committee is to oversee and approve
(where appropriate) the terms of any Related Party
Transaction and to ensure that any such arrangement is
conducted on standard commercial terms and at arm’s
length. The Related Party Committee is cognisant of
the critical role which it plays within THG’s corporate
governance infrastructure and, as required by its Terms of
Reference, has regard to certain mandated factors when
assessing any Related Party Transaction (such as whether
the Related Party Transaction can be viewed as fair and
reasonable and in the best interests of the Group (including
from the perspective of the Company and minority
shareholders)).
Whilst the Terms of Reference provide that Related Party
Transactions may not be authorised or implemented by
the Board unless they have been positively recommended
by the Related Party Committee, they do contain a caveat
to this default position; specifically, if deemed to be in the
best interests of the Company, the Board may resolve
that the Committee’s views are not binding but rather of
a recommendary nature in respect of certain categories
of Related Party Transactions. Noting the important role
which the Related Party Committee plays within the
Group’s governance framework, the importance of ensuring
the Committee is operating to maximum effectiveness
is acknowledged and this is managed through Board
discussions and the annual Board and Board Committee
evaluation exercise.
Activities of the Related
Party Committee
In addition to the ongoing oversight and approval (where
appropriate) of Related Party Transactions, the Committee
gave specific consideration to the following matters during
the 2022 reporting period and in the period up to the date
of this Report:
Officers of the Company
As noted in the 2021 Annual Report, officers of the Propco
Group were then also officers of the Company and certain
of its subsidiaries. Acknowledging the conflict of interest
that may arise from such a position, the decision was taken
to resolve this crossover in officer appointments by 31
December 2022. The necessary action was taken during
the reporting period such that Propco Group officers are
now fully independent of the Group.
Separation of the Group
To ensure the relevant property interests (leases) sat
within the appropriate division following the internal
Group reorganisation which completed during the 2022
financial year, consent was required to be sought from the
Propco Group to reassign and sublet a number of lease
agreements to alternative Group entities. The Related Party
Committee challenged whether this proposal would involve
variations to the existing lease agreements (including in
respect of rent payable by the Group). It was confirmed that
no variations would be required and thereafter the Committee
approved the proposal to seek the relevant consent.
Capital expenditure
Capital expenditure incurred by the Company on properties
leased from the Propco Group - the rationale for the spend
incurred in the year and the nature of the work completed,
ensuring this was appropriate and expenditure expected
of a tenant. The Committee concluded that the nature of
works and level of spend were appropriate.
Schedule of leases
The leases in place were entered into prior to divestment
of the Propco Group to Moulding Capital which preceded
the IPO and therefore prior to the formation of the Related
Parties Committee. A summary of all such leases and terms
was presented to the Committee. The leases and terms
therein were reviewed.
A summary of the rent payable together with the market
rent at inception was also reviewed. Actual rent at the time
of inception varied when compared with market rent at this
time. The Committee subsequently reviewed current market
rent information provided by THG Property specialists and
concluded that the actual rents were appropriate when
reviewed across the Portfolio.
Management charge
Under the terms of a Master Services Agreement (“MSA”),
a management charge is levied upon the Propco Group
by THG for the provision of specified services. The MSA
was updated during the reporting period to reflect the fact
that certain processes, historically performed by THG on
behalf of the Propco Group, would gradually be transferred
over to the Propco Group. The Related Party Committee
considered this change in arrangements between THG
and the Propco Group was satisfied this increased the
independence of Propco and thereafter approved the
revised charge due under the MSA.
Other items
The Related Party Committee approved the details of
the Company’s charitable donation to The Moulding
Foundation. The charitable donation is paid by the
Company in lieu of Matthew Moulding waiving as
much of his annual salary as is legally permissible.
The Committee approved the purchase of fixtures and
fittings from Propco where costs had been paid by MCL on
behalf of THG in respect of a fitout of one of the properties
leased by THG. An extensive review was completed by
management and presented to the Committee to ensure
that all assets were in existence and that all assets were
in use by THG. All assets were then agreed to invoice and
physical existence verified. In addition, legal specialists
and property specialists were engaged to ensure that
this transaction was completed on an arms-length basis.
Following completion of this work and after approval
by the Related Parties Committee the amount was
recognised as an amount owed to related parties (note 27).
On behalf of the Related Party Committee
Dean Moore
Chair of the Related Party Committee
17 April 2023
139
140
Annual Report 2022
Sustainability Committee Report
”The Sustainability Committee plays a crucial role in ensuring the business
is delivering its Sustainability Strategy, THG x Planet Earth, and will
continue to oversee future progress towards medium and long-term
targets. An enhanced understanding of its environmental and social
impact allows THG to create value and opportunities for stakeholders
across the Group’s value chain.”
Iain McDonald
Chair of the Sustainability Committee
Members and attendance
Committee member
Iain McDonald
Steven Whitehead
Philip Pratt
Tiffany Hall
Position
Chair
Member1
Member2
Former Member3
Attendance
5/5
4/5
5/5
1/1
1. Steven Whitehead sits on the Sustainability Committee in his capacity as Group Commercial Director.
2. Prior to his departure from the Company at the beginning of 2023, Philip Pratt sat on the Sustainability Committee in his capacity as Chief Sustainability Officer.
Since his departure Philip Pratt has continued to serve as a member of the Committee but in the capacity of external sustainability adviser to the Committee.
3. Tiffany Hall stepped down from the Board, and as a member of the Sustainability Committee, on 18 March 2022.
Composition and meetings
The Sustainability Committee’s Terms of Reference provide
that the Committee should comprise a minimum of three
members, at least one of whom should be a NED, with
any two Committee members required for a quorate
meeting. Members of the Committee are appointed by
the Board, upon the recommendation of the Nomination
Committee, and whilst, collectively, the Committee must
possess the competence relevant to the sectors in which
the Company operates, individual members must also
have the skillsets and experience relevant to Sustainability
Committee membership. In satisfaction of the relevant
provisions of the Terms of Reference, membership of the
Sustainability Committee currently comprises myself, Iain
McDonald, a NED and Sustainability Committee Chair,
Steven Whitehead, Group Commercial Director and Philip
Pratt, former Chief Sustainability Officer and now external
sustainability advisor to the Committee. As detailed above,
Tiffany Hall, a former NED, was also a member of the
Committee during the reporting period until she stepped
down from the Board on 18 March 2022.
As Chair of the Sustainability Committee and on behalf
of the Board, I am delighted to once again introduce
the Sustainability Committee Report for the 2022
reporting period. Last year THG published its 2030
Sustainability Strategy, THG x Planet Earth, which
represented a significant step in defining the Company’s
key sustainability-related priorities and goals and which,
importantly, also included medium and long-term targets.
As Sustainability Committee Chair, I am very pleased to
note that during 2022 good progress was made towards
achieving the Group’s key sustainability targets, further
information on which can be found in the “Sustainability”
section on pages 57-73. Notable milestones include:
submission of THGs net zero targets for validation
by the SBTi;
defining of THG own-brand packaging roadmaps;
continuation and improvement in supply chain
mapping and ethical supply chain roadmap;
establishing THG Eco with a primary focus
on climate action; and
approval of THG’s first Social Impact Strategy.
•
•
•
•
•
141
Whilst the Terms of Reference mandate that at least three
Sustainability Committee meetings must be held annually,
and at such other times as the Sustainability Committee
Chair may require, five meetings took place during 2022,
with member attendance set out in the foregoing table.
As detailed in the 2021 Annual Report and in recognition
of the Group’s robust sustainability targets and
commitments, it is expected that the Committee will
continue to convene in excess of the stated requirements
during the current financial year.
Additionally, any Sustainability Committee member may
request a meeting of the Committee if they consider it
necessary and, whilst only members of the Committee (and
any individual entitled to be present as an observer) have
the right to attend Committee meetings, other external
advisers may be invited to attend when appropriate.
The Committee also has Board authority to secure the
attendance of any other person as and when considered
necessary. During 2022, the Chief Risk Officer, the General
Counsel and Company Secretary, the Procurement Director
and the Group Director of HSE regularly attended meetings
at the request of the Committee, along with other members
of Senior Management.
Role and responsibilities
The role of the Sustainability Committee is narrated within
its Terms of Reference which clarify that its overarching
purpose is to ensure that the Group has appropriate and
effective strategies, policies and operational controls in
place to allow its business to be conducted in a responsible
manner and to ensure accountability in respect of
performance against the 2030 Sustainability Strategy and
applicable targets. The specific duties of the Committee
are detailed within the Terms of Reference and include
responsibilities such as reviewing and monitoring:
•
•
•
the Group’s strategies, policies and targets in relation
to, for example, energy and carbon management,
climate change, waste and recycling;
Senior Management’s assessment of the health,
safety, security, environmental and social impacts
resulting from the Group’s operations, with particular
regard to the impact on its employees, suppliers,
contractors and host communities; and
the Group’s systems for compliance with applicable
environmental/sustainability-related legal and
regulatory requirements and performance against
those requirements.
To ensure the full and effective discharge of its duties,
the Terms of Reference provide that the Sustainability
Committee will have access to such sufficient resources as
are necessary (including advice and assistance from Group
Secretariat or the specialist support of external advisers).
Activity during the year
The Committee has a number of standing agenda items which
it considers in line with its Terms of Reference including:
•
•
•
•
reviewing internal reports on progress towards
set targets and KPIs in support of the 2030
Sustainability Strategy and agreeing further
targets and KPIs where appropriate;
assessment, benchmarking and recommendations on
policies, processes, and procedures for sustainability;
overseeing the Group’s conduct with regard to its
corporate and societal obligations, including reviewing
THG’s statement on Modern Slavery and Trafficking;
in conjunction with the Risk Committee, reviewing
Climate Change, Environmental and Social
Responsibility as a principal risk to ensure relevant
sub-risks are identified and the necessary actions
taken to mitigate these risks; and
• monitoring and reviewing processes for the risk
assessment of corporate responsibility, sustainability,
and compliance and ethical conduct.
Activities of the
Sustainability Committee
A summary of the key activities undertaken by the
Sustainability Committee during the 2022 financial
year is as follows:
•
•
•
•
•
•
•
•
sustainability linked remuneration targets for the
Executive Leadership Team reviewed and recommended
to the Remuneration Committee for approval;
review of the Group’s baseline Scope 1, 2 and 3
emissions, setting net zero targets for submission
to the SBTi for validation;
ethical supply chain update and supplier survey
results review;
approval of Social Impact Strategy and updated
D&I Strategy;
circularity and plastics action plan update;
Investor Relations – ESG rating agencies
perspectives update;
TCFD and non-financial reporting regulations
compliance update;
THG Eco business model and route to market update;
and
• HSE review and progress update.
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Annual Report 2022
Focus for 2023
During the current financial year, it is anticipated that
key areas of focus for the Sustainability Committee will
be as follows:
•
•
•
oversee and make recommendations to the
Executive Leadership Team and the Board
for actions to be taken in respect of the Group’s
sustainability, ethics and compliance strategies,
policies, programmes, and activities;
take a proactive approach in anticipating
and preparing for non-financial legislative
or regulatory changes and reviewing processes
to ensure compliance;
undertake the bi-annual review of the 2030
Sustainability Strategy, objectives, and targets; and
On behalf of the Sustainability Committee
• monitor and review progress relating to TCFD,
particularly in understanding potential risks
and uncertainties based on outcomes of the
scenario analysis.
Iain McDonald
Chair of the Sustainability Committee
17 April 2023
Directors’ Remuneration Report
“The Remuneration Committee is committed to ensuring that the
Company’s leadership is suitably motivated and incentivised to
successfully implement the Company’s strategy, in turn delivering
long-term, sustainable growth for stakeholders, and the current
Remuneration Policy has been designed to support these objectives.”
Dean Moore
Chair of the Remuneration Committee
Members and attendance
Committee member
Dean Moore
Iain McDonald
Gillian Kent
Damian Sanders
Dominic Murphy
Tiffany Hall
Position
Chair1
Member
Member2
Former Member3
Former Member4
Former Member5
Attendance
1/1
6/6
n/a
6/6
3/4
3/3
1. Dean Moore was appointed Remuneration Committee Chair upon his appointment to the Board on 15 September 2022.
2. Gillian Kent was appointed to the Remuneration Committee on 24 January 2023 when Damian Sanders stepped down as a member upon his appointment
as an Executive Director.
3. Damian Sanders was appointed Remuneration Committee Chair on an interim basis on 18 March 2022 but stepped down from this position upon Dean
Moore’s appointment to the Committee on 15 September 2022. He thereafter stepped down as a member of the Committee upon his appointment as an
Executive Director on 24 January 2023.
4. Dominic Murphy stepped down from the Board and as a member of the Remuneration Committee on 8 June 2022.
5. Tiffany Hall stepped down from the Board and as Remuneration Committee Chair on 18 March 2022. Damian Sanders assumed the position of Chair on an
interim basis from this date until Dean Moore’s appointment on 15 September 2022.
As the recently appointed Chair of the Remuneration
Committee, I am delighted to introduce the Directors’
Remuneration Report for the 2022 financial year and
would like to thank Damian Sanders for assuming the role
of Chair on an interim basis, and leading the Committee,
in the period prior to my appointment. I would echo
Damian’s sentiments in the 2021 Annual Report that the
Remuneration Committee remains committed to ensuring
that the Group’s leadership is appropriately motivated
and incentivised to deliver long-term sustainable growth
for Shareholders, noting that a key component of this is
ensuring that the Group continues to attract and retain
talent with the knowledge and skillsets required to
maximise the organisation’s performance and success.
This Directors’ Remuneration Report has been prepared in
accordance with The Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008 (as
amended), the Listing Rules and the Code and is divided
into three sections:
•
•
•
this annual statement from me, the Remuneration
Committee Chair;
the Remuneration Policy; and
the Annual Report on Remuneration which
details payments made to Directors in the 2022
reporting period and which is subject to an advisory
Shareholder vote at the forthcoming AGM.
143
144
Annual Report 2022
Composition and meetings
The Terms of Reference provide that the Remuneration
Committee must comprise not less than three NEDs, the
majority of whom must be independent, who are selected
by the Board on the recommendation of the Nomination
Committee and in consultation with the Remuneration
Committee Chair (who must also be an independent NED).
With the exception of Iain McDonald, all Remuneration
Committee members are deemed to be independent and it is
considered that current membership ensures the Committee
is well-placed to operate at maximum effectiveness. Whilst
recognising the Code’s position that only independent non-
executive directors should sit on a company’s remuneration
committee (and as discussed further in the Corporate
Governance Statement on page 107), the Board does
not consider that it would be in the best interests of the
Company and its stakeholders for Iain McDonald to step
down from membership of the Committee at the present
time. In addition to the fact that the Board currently comprises
only two independent NEDs, both of whom are members
of the Committee, the Board believes that Iain McDonald’s
extensive remuneration experience is not only a valuable
addition to the Remuneration Committee but also serves to
enhance its overall balance of knowledge and skillsets. It is
therefore anticipated that Iain McDonald’s membership of the
Remuneration Committee will continue for the time being,
albeit the matter will be kept under ongoing review with
regard to, for example, the timing and independence
of future Board appointees.
As detailed above, Tiffany Hall stepped down from the
Board and as Remuneration Committee Chair on 18 March
2022. Damian Sanders assumed the position of Chair at this
time on an interim basis until Dean Moore was appointed
to the Board and as Remuneration Committee Chair on
15 September 2022. Damian Sanders remained a member
of the Committee until his appointment as an Executive
Director on 24 January 2023, at which point Gillian Kent
assumed membership of the Committee. Dominic Murphy
was also a member of the Committee during the 2022
reporting period until he stepped down from the Board on
8 June 2022.
A summary of these changes, together with the other Board
changes which took place during 2022, is as follows (with
further details included within the Governance Report):
NED /
Former NED
Tiffany Hall
Charles Allen
Dominic Murphy
Gillian Kent
Dean Moore
Zillah Byng-Throne
Andreas Hansson
Damian Sanders
Appointment Resignation Date
✓
✓
✓
✓
✓
✓
✓
18 March 2022
22 March 2022
08 June 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
n/a
n/a
24 January 20231
1. This is the date on which Damian Sanders stepped down as a NED and
was appointed an Executive Director.
145
At least two Remuneration Committee meetings must take
place annually and at such other times as required by the
Remuneration Committee Chair or as requested by any
Committee member should they consider it necessary. The
Remuneration Committee met on six occasions during 2022,
with member attendance set out in the foregoing table.
The Terms of Reference provide that whilst only Committee
members are entitled to attend these meetings others, such
as Senior Management and external advisers, may be invited
to attend as and when considered appropriate, as was the
case during the reporting period.
Role and responsibilities
As detailed within its Terms of Reference, a primary
responsibility of the Remuneration Committee is to
determine the remuneration package of Executive Directors
and the Independent Chair. More generally, it is the
responsibility of the Remuneration Committee to ensure that
remuneration practices and policies support the Group’s
strategy and promote its long-term sustainable success.
Other key duties of the Committee, as detailed within the
2021 Annual Report, include:
•
•
•
•
approving the design of, and determining targets for,
any performance-related pay schemes operated by the
Company and the payments made thereunder;
exercising its use of discretion, where appropriate, to
override formulaic remuneration outcomes;
reviewing the ongoing appropriateness and relevance
of the Remuneration Policy (further details on which
follow), together with the approach to implementation,
in the context of pay policies and practices across
the wider workforce and the Group’s culture,
while consulting with, and seeking approval from,
Shareholders (and other stakeholders) as appropriate;
and
reviewing and having regard to pay and employment
conditions across the Company and/or Group as a whole,
including those of the Executive Leadership Team.
Remuneration Policy
To ensure the Remuneration Policy was suitably future-
proofed for the medium term certain amendments were
proposed at the 2022 AGM, including the incorporation
of a market standard shareholding requirement for future
Executive Directors and the introduction of a LTIP, to allow
awards to be granted to certain Executive Directors and thus
maximise alignment with long-term Shareholder interests.
Whilst these amendments were approved by Shareholders,
the Remuneration Committee will, as mandated, continue to
review the ongoing suitability of the Remuneration Policy to
ensure it remains fit for purpose and evolves as required.
2022 remuneration outcomes
Damian Sanders. The measures and weightings for the 2023
bonus awards will be:
The Remuneration Committee operated the Remuneration
Policy broadly as intended during the 2022 reporting period,
with the exception that no performance-related pay awards
were made in 2022. In light of the global macroeconomic
environment both Matthew Moulding and John Gallemore
opted to waive their entitlement to participate in the annual
bonus plan for the 2022 reporting period (as in prior years).
Further, whilst the introduction of a LTIP was approved by
Shareholders at the 2022 AGM, the decision was taken to
refrain from making any awards under it for the same reason.
No salary increases were awarded during the 2022
reporting period and, as was the case for the 2021 reporting
period, Matthew Moulding waived as much as was legally
permissible of his base salary in return for the Group making
a charitable donation of similar value. John Gallemore also
waived as much as was legally permissible of his base salary
in return for the Group making a charitable donation of
similar value for the period 1 January 2022 to 30 June 2022,
after which he was paid his normal contractual salary.
Remuneration for 2023
The Remuneration Committee intends to implement
the Remuneration Policy during 2023 as follows:
Base salary
A key activity of the Remuneration Committee during 2022
was the consideration and approval of the remuneration
package for Damian Sanders following his appointment to
the role of CFO on 24 January 2023. Remuneration for this
role will be operated in line with the Remuneration Policy,
with a base salary of £500,000 per annum being payable
from the date of his appointment.
No salary increases will be awarded to Matthew Moulding
or John Gallemore for the 2023 reporting period.
Annual bonus
A review of THG’s sustainability strategy was undertaken
during 2021, involving robust engagement with investors,
partners and wider stakeholders, to ensure the Group
had appropriate and effective strategies, policies and operational
controls in place to conduct its business in a responsible
manner (including performance against the 2030 Sustainability
Strategy and in relation to ESG matters more generally). From
a remuneration perspective, a notable outcome of this review
was the setting of sustainability-linked objectives. From 2022
onwards, sustainability-linked objectives will be assessed in the
annual bonus scorecard for the CEO, members of the Executive
Leadership Team and Senior Management.
In line with the Remuneration Policy, annual bonus awards
will be granted with a maximum opportunity of 100% of base
salary for each of Matthew Moulding, John Gallemore and
•
•
•
•
Group Sales (20%);
Group adjusted EBITDA (30%);
Free Cash Flow (25%); and
Strategic objectives including ESG metrics (25%).
LTIP
In line with the Remuneration Policy, the Remuneration
Committee intends to grant awards of 250% of base salary
to each of John Gallemore and Damian Sanders under the LTIP
during 2023. Awards will be subject to stretching financial and
strategic performance targets which will be disclosed at the time
of grant and measured over a three-year period, with a further
two-year post-vesting holding period applying in line with the
relevant Code requirement and market best practice.
Consideration of stakeholder views
Prior to annually reviewing the remuneration of the Executive
Directors, the Remuneration Committee considers pay,
benefits and share scheme practices for employees across
the Group. Whilst no direct workforce engagement took place
in respect of the Remuneration Policy changes which were
approved at the 2022 AGM, the adoption of a LTIP for Executive
Directors is aligned with the approach to Senior Management
remuneration. The Group is committed to promoting and
maintaining good relations with employees and, where relevant,
their representative bodies as part of its broader workforce
engagement strategy and intends to enhance the level of its
remuneration-specific engagement over the course of 2023.
AGM
I very much look forward to meeting with Shareholders at
the forthcoming AGM to discuss any queries or comments
on this Directors’ Remuneration Report or on Group
remuneration matters more generally. If necessary, I can
be contacted in advance of the AGM, via the Company
Secretary, to discuss any more pressing remuneration
questions which Shareholders may have.
On behalf of the Remuneration Committee
Dean Moore
Chair of the Remuneration Committee
17 April 2023
146
Annual Report 2022
Remuneration Policy
Introduction
As detailed above, certain amendments to the
Remuneration Policy were approved by Shareholders
at the 2022 AGM (with 99.88% of votes in favour),
with the amendments to the Remuneration Policy
becoming effective upon approval.
A summary of the Remuneration Policy is set out
below for reference to assist with the understanding
of this Directors’ Remuneration Report. Full details
of the Remuneration Policy can be found on
pages 183-193 of the 2021 Annual Report.
Performance
measures
n/a
Component
and objective
Operation
Opportunity
Base salary
To enable the Group
to attract, motivate
and retain the
people it needs to
maximise the value
of the business
Generally reviewed each year, with
increases effective 1 January.
Salary levels take account of:
• salaries at FTSE companies of broadly
similar size or sector to THG;
• salary increases across the
rest of the UK business;
• role, personal performance
and experience; and
• business performance and
the external environment.
There is no fixed maximum.
Salaries in respect of the year
under review (and for the following
year) are disclosed in the Annual
Report on Remuneration.
Salary increases for Executive Directors
will normally not exceed those of the
wider workforce over the period this
Remuneration Policy applies. Where
increases are awarded in excess of
the wider employee population, the
Remuneration Committee will provide
the rationale in the relevant year’s Annual
Report on Remuneration (e.g. if there is
a material change in the responsibility,
size or complexity of a role).
Pension
To provide a level
of retirement benefit
that is competitive in
the relevant market
Executive Directors receive pension contributions
either as a direct payment or a cash allowance.
Base salary is the only element of
remuneration that is pensionable.
Benefits
To provide a level
of benefits that is
in line with relevant
market practice
Executive Directors may be provided with
medical insurance benefits, permanent health
insurance and life assurance.
Other benefits, including all employee share
schemes, may be introduced from time
to time to ensure the benefits package is
appropriately competitive and reflects the
needs and circumstances of the Group
and individual Executive Directors.
n/a
Executive Directors receive a Company
contribution of a maximum in line
with the wider workforce for the
relevant country. This is currently
set at 3% of pensionable salary
for UK Executive Directors.
Pensionable salary is determined in
line with the approach taken for the
wider workforce which is currently
in line with auto-enrolment levels.
Benefits may vary by role and the level is
determined each year to be appropriate
for the role and circumstances of
individual Executive Directors.
n/a
It is not anticipated that the cost of
benefits (as set out in the Annual
Report on Remuneration) will increase
materially over the period for which
this Remuneration Policy applies.
The Remuneration Committee retains
the discretion to approve a higher
cost in exceptional circumstances (e.g.
relocation expenses or an expatriation
allowance on recruitment) or in
circumstances where factors outwith the
Group’s control have changed materially
(e.g. market increases in insurance costs).
Component
and objective
Operation
Opportunity
Performance
measures
Annual bonus
To focus Executive
Directors on
achieving demanding
annual targets
relating to Group
performance
LTIP
To incentivise
Executive Directors
whilst providing
alignment with
Shareholder interests
Shareholding
requirement
To align Executive
Director and
Shareholder interests
and reinforce
long-term decision
making, including
for a period following
cessation of
employment
Chair and
NED fees
To attract and
retain NEDs of the
highest calibre with
broad commercial
experience relevant
to the Group
Performance targets are set at the start of each
financial year and aligned with the annual
budget agreed by the Board. At the end of the
financial year in question, the Remuneration
Committee determines the extent to which
these targets have been achieved.
50% of the total bonus payable is normally
paid in cash with 50% deferred in nil cost
options over Ordinary Shares. These options
are exercisable after three years, subject to
continued employment and malus (in whole
or in part) during the deferral period in the
event of a material misstatement in accounting
records, gross misconduct, calculation error
or corporate failure. Cash bonuses may be
subject to clawback over the deferral period
in similar circumstances as identified above.
A payment equivalent to the dividends that would
have accrued on deferred bonus awards that
vest may be made to participants on vesting.
Awards are granted annually in the form of nil
cost options or conditional awards of Ordinary
Shares. These will vest at the end of a three-year
period subject to continued employment and
satisfaction of the performance conditions.
A further two-year holding period
will apply post-vesting.
The Remuneration Committee may
award dividend equivalents on awards
to the extent that these vest.
Malus and clawback provisions will apply to
enable the Company to recover sums paid or
withhold the payment of any sum in the event of a
material misstatement resulting in an adjustment
to the audited consolidated accounts of THG
or action or conduct which, in the reasonable
opinion of the Board, amounts to employee
misbehaviour, fraud or gross misconduct.
Matthew Moulding and John Gallemore are
required to retain at least 50% of any incentive
awards that vest (net of tax) until they have
built up a personal holding of Ordinary
Shares worth at least 350% of salary.
Any future Executive Directors must build up
and subsequently retain a shareholding of at
least 200% of salary over a five-year period from
the date of their appointment to the Board.
A post-cessation shareholding requirement of
350% of salary to be held for two years after an
Executive Director’s employment is terminated
in the case of Matthew Moulding and John
Gallemore and 200% of salary for any future
Executive Directors (or full actual holding if lower).
NEDs are paid a basic annual fee. Additional
fees may be paid to NEDs who chair a Board
Committee and/or sit on a Board Committee
to reflect additional responsibilities.
The fees paid to NEDs are determined
by the Board and may be paid in a
mix of cash and Ordinary Shares.
Fee levels are reviewed periodically, with
any adjustments effective 1 January. Fees are
reviewed by considering external advice on
best practice and fee levels at other FTSE
companies of broadly similar size and sector
to THG. Time commitment and responsibility
are also considered when reviewing fees.
Maximum opportunity: 200% of base
salary (with 50% deferred into Ordinary
Shares vesting after three years).
Target opportunity: 50% of
maximum opportunity.
Threshold opportunity: at most,
25% of maximum opportunity.
Matthew Moulding and John Gallemore
will have a reduced opportunity of
100% of salary which will be payable
fully in cash. They also intend to waive
any amounts which become payable
under the annual bonus scheme
in future years in lieu of donations
to charity of a similar amount.
Normally annual awards of up to
250% of base salary. In exceptional
circumstances, such as to secure an
external appointment or in specific
retention scenarios, an award of up to
300% of base salary may be made.
Matthew Moulding will not be
eligible to participate in the LTIP.
The bonus will be based on the
achievement of financial and non-
financial performance targets which
may vary year-to-year but at least
50% of the total opportunity will be
based on financial performance.
Details of the measures and weighting
on which the bonus will be based will
be disclosed in the relevant Annual
Report on Remuneration. If the
Remuneration Committee determines
certain targets to be deemed
commercially sensitive, the targets
will be disclosed retrospectively.
The Remuneration Committee has
discretion to adjust the formulaic bonus
outcomes (including down to zero)
within the limits of the scheme if the
formulaic outcome is not reflective of
underlying business performance.
The majority of the awards will be
based on financial metrics, with the
balance based on strategic metrics.
The Remuneration Committee retains
discretion, in exceptional circumstances,
to change performance measures
and targets and the weightings
attached to performance measures
partway through a performance
period if there is a significant and
material event which causes the
Remuneration Committee to believe
the original measures, weightings and
targets are no longer appropriate.
The Remuneration Committee also
has discretion to adjust the formulaic
vesting outcome (including down to
zero) within the limits of the scheme if
the formulaic outcome is not reflective
of underlying business performance.
n/a
n/a
Fee increases will be applied considering
the outcome of the review.
n/a
The fees paid to NEDs in respect of
the year under review (and for the
following year) are disclosed in the
Annual Report on Remuneration.
147
148
Annual Report 2022
Annual Report on Remuneration
Base salary (audited)
Bonus awards (audited)
This section covers the reporting period from 1 January 2022 to 31 December 2022 and provides details of the implementation
of the Remuneration Policy during the period, as well as the intended implementation during the current 2023 reporting period.
Single total figure of remuneration (audited)
The following table provides a single figure for total remuneration of the Directors for the financial year to 31 December 2022,
together with comparative figures for the financial year to 31 December 2021. The values of each element of remuneration
are based on the actual value delivered, where known. The value of the annual bonus includes both the cash element and
the element deferred into Shares.
Executive Directors
Matthew Moulding 2022
John Gallemore
NEDs
Charles Allen3
Damian Sanders4
2021
2022
2021
2022
2021
2022
2021
Edward Koopman 2022
Iain McDonald
Gillian Kent3
Dean Moore3
Former NEDs
Tiffany Hall5
Dominic Murphy5
Zillah Byng-
Thorne5
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Andreas Hansson5 2022
2021
Salary
& fees1
(£’000)
Benefits
Pension
(£’000)
(£’000)
Total
fixed pay
(£’000)
Annual bonus1
LTIP
Other
(£’000)
(£’000)
(£’000)
Total
variable pay
(£’000)
Total
(£’000)
21
20
235
20
328
n/a
157
132
36
35
58
60
30
n/a
30
n/a
19
81
29
93
71
100
25
6
12
4332
5
5
0
0
0
1
0
0
n/a
n/a
0
0
0
0
0
0
0
n/a
0
n/a
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
n/a
0
n/a
0
0
0
0
0
0
0
0
33
453
241
25
328
n/a
157
132
36
35
58
60
30
n/a
30
n/a
19
81
29
93
71
100
25
6
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
n/a
n/a
n/a
n/a
0
0
0
0
0
0
0
n/a
0
n/a
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
n/a
0
n/a
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
n/a
0
n/a
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
n/a
0
n/a
0
0
0
0
0
0
0
0
33
453
241
25
328
n/a
157
132
36
35
58
60
30
n/a
30
n/a
19
81
29
93
71
100
25
6
1. From Admission and subject to minimum statutory limits, Matthew Moulding has elected to waive his salary with John Gallemore electing to waive his
salary for the period from Admission to 30 June 2022. The salaries and bonuses detailed in the table above for these individuals are the amounts received
in the periods. For the financial year ending 31 December 2021, the salaries waived by Matthew Moulding and John Gallemore were £730,414 and £430,414
respectively. For the financial year ending 31 December 2022, the salaries waived by Matthew Moulding and John Gallemore were £729,331 and £214,328
respectively. The Group made charitable donations equivalent to these amounts which are in addition to the donations included in the Adjusted Items
set out in Note 4 to the Financial Statements. For the financial year ending 31 December 2022, both Matthew Moulding and John Gallemore waived their
entitlement to participate in the annual bonus plan, as they did for the financial year ending 31 December 2021.
2. In line with the previous Remuneration Policy, the Company provided private security cover to Matthew Moulding and his family to allow him to carry out his
duties as CEO. Whilst the cost of this cover is included within the 2021 benefits figure it has been personally funded by Matthew Moulding from 1 January
2022 onwards and is not therefore included within Matthew Moulding’s remuneration figure for the 2022 reporting period.
3. The figures for the 2022 reporting period have been pro-rated to reflect Charles Allen’s appointment to the Board from 22 March 2022 and the
appointments of Gillian Kent and Dean Moore from 15 September 2022.
4. Damian Sanders was appointed chair of: (i) the Divisional Reorganisation Committee upon its inception on 1 July 2021 and remained as chair until
the Committee’s dissolution on 31 July 2022; and (ii) the Profit Improvement Committee, established to oversee efficiency projects across the Group,
incorporating oversight of cost rationalization programmes and specific review of areas identified for performance improvement (the “PIC”), upon its
inception on 1 August 2022. He received a fee of £80,000 (pro-rated as appropriate) in respect of each of these chairships during the 2022 reporting period.
5. The figures for the 2022 reporting period have been pro-rated to reflect Tiffany Hall stepping down from the Board on 18 March 2022, Dominic Murphy
stepping down from 8 June 2022 and each of Zillah Byng-Thorne and Andreas Hansson stepping down from 15 September 2022.
Both Matthew Moulding and John Gallemore chose
to waive their entitlement to participate in the annual
bonus plan for the 2022 financial year.
Scheme interests awarded (audited)
No such awards were made to Directors during the
2022 financial year.
Payments to past Directors (audited)
No payments were made to past Directors during
the 2022 financial year.
Loss of office payments (audited)
No loss of office payments were made during the
2022 financial year.
External appointments
None of the Executive Directors received any fees
in relation to external non-executive roles.
The base salaries of the Executive Directors are typically
reviewed on an annual basis, with any increases effective
from 1 January. As detailed in the Remuneration Policy,
when determining any increases the Remuneration
Committee compares the Group’s remuneration packages
for its Executive Directors with those of directors in FTSE
companies of similar size or sector to THG and also takes
account of salary increases across the rest of the UK
business, an individual’s role and personal performance,
business performance and the external environment.
No salary increases were awarded to Executive Directors
during the 2022 reporting period. As such, at 31 December
2022 salary levels were as follows:
• Matthew Moulding: £750,000; and
•
John Gallemore: £450,000.
As previously stated, Matthew Moulding waived as much
as was legally permissible of his base salary during the
2022 reporting period in return for the Group making a
charitable donation of similar value. John Gallemore also
waived as much as was legally permissible of his base
salary in return for the Group making a charitable donation
of similar value for the period 1 January 2022 to 30 June
2022. For the financial year ending 31 December 2022, the
salaries waived by Matthew Moulding and John Gallemore
were £729,331 and £214,328 respectively.
Pension (audited)
As part of their remuneration arrangements, the Executive
Directors are entitled to receive pension contributions from
the Company. Under these arrangements, they can elect for
those contributions to be paid in the form of taxable pension
allowance or direct payments into a personal pension plan
or the Group’s UK defined contribution scheme.
During the 2022 reporting period, £433 and £872 were
paid into the personal pension plans of Matthew Moulding
and John Gallemore respectively. This represented 3% of
pensionable salary.
Benefits (audited)
In line with the current Remuneration Policy, benefits in
kind for each of Matthew Moulding and John Gallemore
comprised medical insurance benefits, permanent health
insurance and life assurance. Matthew Moulding has
personally funded his private security from 1 January
2022 onwards.
149
150
Annual Report 2022 Directors’ shareholdings (audited)
Directors’ share ownership guidelines (audited)
The table below shows the shareholdings of each Director as at 31 December 2022:
Director
Ordinary
Shares
D1 Shares
D2 Shares
Deferred
2 Shares
E Shares
F Shares
G Shares
H Shares
Executive Directors
Matthew Moulding1,2
198,744,095
50,550,450
John Gallemore
104,237
3,533,879
NEDs
Charles Allen3
2,400,000
Damian Sanders3
21,926
Edward Koopman
0
Iain McDonald
2,505,943
Gillian Kent
Dean Moore
Former NEDs
0
0
Tiffany Hall4
33,557
Dominic Murphy5
14,566,016
Zillah Byng-Thorne6
69,765
Andreas Hansson6
0
0
0
0
0
0
0
0
0
0
0
360 (equivalent to
66,772 Ordinary
Shares)
3,174 (equivalent to
588,702 Ordinary
Shares)
18,346,774
43,641,266
20,197,808
7,733,792
813,345
185,476
2,666,963
4,000,537
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
14,524
185,476
0
0
0
0
0
0
29,047
370,953
25,417
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1. In addition to the Shares shown above, Matthew Moulding holds 1 Special Share (further details on which are set out in the Directors’ Report).
2. 160,486,876 of the Ordinary Shares, 10,971,090 of the Deferred 2 Shares and all of the F Shares and G Shares owned by Matthew Moulding are held by FIC
ShareCo Limited, a corporate entity wholly owned by Matthew Moulding. Additionally, 9,834,879 of the Ordinary Shares shown in the table above are held
by Jodie Moulding, Matthew Moulding’s wife.
3. Charles Allen and Damian Sanders hold Shares and, in consideration of these individual shareholdings and NED independence, the Board has applied
its assessment criteria including, but not limited to, whether a NED has held a material business relationship with the Company in the last three years.
Taking into account assessments of materiality and the 3% notification threshold under the DTRs’ major shareholdings notification regime, the Board
acknowledges that the shareholdings of these NEDs sit significantly below the notification threshold and therefore do not impair their independence.
4. Tiffany Hall stepped down from the Board on 18 March 2022 and her shareholding is stated as at this date.
5. Dominic Murphy stepped down from the Board on 8 June 2022 and his shareholding is stated as at this date.
6. Both Zillah Byng-Thorne and Andreas Hansson stepped down from the Board on 15 September 2022 and their shareholdings are stated as at this date.
There have been no changes to Directors’ shareholdings between 31 December 2022 and the date of this Directors’
Remuneration Report.
As described in the Remuneration Policy, Matthew Moulding and John Gallemore are both expected to build up a holding
in Ordinary Shares equal to 350% of their base salary over a period of time. NEDs are not subject to any shareholding
requirements. Executive Directors’ share ownership at the end of the 2022 reporting period was as follows:
Director
Shareholding requirement
(%age of salary)
Shareholding as at 31 December
2022 (%age of salary)
Shareholding
requirement met?
Matthew Moulding
350%
John Gallemore
350%
25,200%1
1,472%2
Yes
Yes
1. Matthew Moulding’s aggregated shareholding includes all Shares (i.e. Ordinary Shares, D1 Shares, D2 Shares, E Shares, F Shares, G Shares and Deferred 2
Shares) held by Matthew Moulding, his wife, Jodie Moulding, and FIC ShareCo Limited, a corporate entity wholly owned by Matthew Moulding.
2. John Gallemore’s aggregated shareholding includes all Shares (i.e. Ordinary Shares, D1 Shares, D2 Shares, E Shares, F Shares, G Shares and Deferred 2
Shares) held by him.
Current shareholdings are based on Shares owned outright and valued using the average Ordinary Share price over the
three months ended 31 December 2022 i.e. £0.557.
Performance graph and table
The following graph shows the TSR (i.e. total shareholder return) performance over the period from Admission to 31
December 2022 relative to the FTSE 250 Index. It illustrates the performance of a £100 investment in the Company in that
period compared with the value of £100 invested in the FTSE 250 Index over the same period.
While the FTSE 100 Index was used in previous years, the FTSE 250 Index is now considered to be a more appropriate
comparator for this purpose as it is a broad equity index into which the Company’s market cap falls.
180
160
140
120
100
80
60
40
20
0
151
152
Listed
Dec 20
Dec 21
Dec 22
THG PLC
FTSE250
Annual Report 2022 Chief Executive Officer’s historical remuneration
Chief Executive Officer’s pay ratio
The following table details the Chief Executive Officer’s remuneration for each of the last three financial years:
Single figure (£’000)
Bonus outcome as a percentage of maximum
Long-term incentive outcome as a percentage of maximum
2020
870,139
100%
100%
2021
453
n/a1
n/a2
2022
33
n/a1
n/a2
1. Matthew Moulding waived his entitlement to participate in the annual bonus plan for each of the 2021 and 2022 financial years.
2. No LTIP was eligible to vest in respect of either the 2021 or 2022 financial years and Matthew Moulding does not participate in any ongoing LTIP.
Percentage change in Directors’ remuneration
The Executive Directors are the only employees of the Company and therefore the UK workforce has been selected as the
appropriate comparator group to provide a meaningful comparison since this is the geographical location in which all of
the Executive Directors and the majority of NEDs are based. Accordingly, the following table shows the percentage change
in the Directors’ salaries, benefits (excluding pension) and annual bonuses between the 2020 and 2021 and 2021 and
2022 financial years, compared with the percentage change in the average of each of these components of pay for all UK
employees for each of these periods. The comparison uses a per capita figure.
2021 to 2022
2020 to 2021
Salary / fees
Benefits
Bonus
Salary / fees
Benefits
Bonus
5.5%
1,100.7%
n/a3
18.8%5
2.1%
-2.8%
n/a3
n/a3
-97.3%
2.6%
0%
0%
0%
0%
0%
0%
n/a
n/a
n/a4
n/a4
n/a4
n/a4
n/a4
n/a4
-95.8%
-91.6%
n/a3
780%
250%
325%
n/a3
n/a3
17.0%
63.0%
n/a3
0%
0%
0%
n/a3
n/a3
-100%
-100%
n/a4
n/a4
n/a4
n/a4
n/a4
n/a4
Executive Directors
Matthew Moulding1
John Gallemore2
NEDs
Charles Allen
Damian Sanders
Edward Koopman
Iain McDonald
Gillian Kent
Dean Moore
Wider workforce
Average employee6
10.5%
-20.8%
-85.4%
10.1%
217.3%
-37.5%
Former NEDs
Tiffany Hall
Dominic Murphy
Zillah Byng-Thorne
Andreas Hansson
-76.3%7
-68.5%7
-29.1%7
313.6%7
0%
0%
0%
0%
n/a2
n/a2
n/a2
n/a2
n/a8
244%
100%
n/a8
0%
0%
0%
0%
n/a2
n/a2
n/a2
n/a2
1. From Admission and subject to minimum statutory limits, Matthew Moulding has elected to waive his salary and the percentage increase stated above
reflects changes in these statutory limits rather than changes to salary levels. The reduction in the benefits figure relates to Matthew Moulding’s private
security cover which was funded by the Company in 2021 and personally funded from 1 January 2022 onwards. As in 2021, Matthew Moulding waived his
entitlement to participate in the annual bonus plan.
2. During 2021 John Gallemore elected to waive his salary subject to minimum statutory limits. In 2022 John Gallemore elected to waive his salary to 30 June
2022 and since this date has been paid his standard base salary. The percentage increase stated above reflects John Gallemore electing not to waive his
salary during the period 1 July 2022 to 31 December 2022. As in 2021, John Gallemore waived his entitlement to participate in the annual bonus plan.
3. Charles Allen, Gillian Kent and Dean Moore were not Directors during the 2021 financial year. Charles Allen was appointed to the Board on 22 March 2022
and Gillian Kent and Dean Moore were both appointed on 15 September 2022.
4. NEDs are not entitled to participate in the annual bonus plan.
5. Damian Sanders was appointed chair of: (i) the Divisional Reorganisation Committee upon its inception on 1 July 2021 and remained as chair until the
Committee’s dissolution on 31 July 2022; and (ii) the PIC upon its inception on 1 August 2022. He received a fee of £80,000 (pro-rated as appropriate) in
respect of each of these chairships during the 2022 reporting period.
6. THG PLC is the parent company of the Group and, with the exception of the Executive Directors, does not have any employees. The figures detailed here are
therefore representative of the Group’s UK workforce.
7. Each of these former NEDs stepped down from the Board during the 2022 reporting period. Tiffany Hall stepped down on 18 March 2022, Dominic Murphy
stepped down on 8 June 2022 and both Zillah Byng-Thorne and Andreas Hansson stepped down on 15 September 2022.
8. Each of these former NEDs were also not Directors during the 2020 reporting period. Tiffany Hall was appointed to the Board on 12 January 2021 and
Andreas Hansson was appointed to the Board on 26 October 2021.
The following table presents the pay ratio between the Chief Executive Officer’s single total figure of remuneration and
that of the Group’s UK workforce. The ratios compare the Chief Executive Officer’s single total figure of remuneration
with the total remuneration of full-time equivalent UK employees at the 25th, median and 75th percentiles.
Year
2022
2021
Method
Option A
Option A
CEO remuneration
(£,000)
25th percentile
pay ratio
Median pay ratio
75th percentile
pay ratio
33
453
1.2:1
21:1
1.1:1
18:1
0.8:1
14:1
UK employees (full-time equivalents)
The total pay and benefits and salary figures used for the pay ratio calculations are set out in the following table:
Year
2022
Salary
2022
Total pay and benefits
25th percentile
£23,018.10
£27,872.37
Median
£26,679.32
£29,977.27
75th percentile
£38,158.33
£39,942.46
UK employees (full-time equivalents)
The 25th percentile, median and 75th percentile figures used to determine the above ratios were selected by reference to
the hourly pay figures for the Group’s UK workforce. Option A, as set out under the Regulations, was used to calculate
remuneration for the 2022 financial year as the Company believes this is the most robust methodology for calculating these
figures (and reflects the approach adopted for the 2021 financial year). The full-time equivalent annualised remuneration
(comprising salary, benefits, pension, annual bonus and long-term incentives) was then calculated for those employees
for the 2022 financial year.
The ratio continues to reduce year-on-year, primarily as a result of Matthew Moulding waiving as much of his base
salary as is legally permissible in return for the Group making a charitable donation of similar value, as well as waiving
his entitlement to participate in the annual bonus and not participating in any long-term incentive scheme. Executive
Director pay is, typically, more at risk than wider employee pay due to the use of variable pay which is not guaranteed and
hence, depending on incentive plan outcomes, can lead to a total pay ratio that varies significantly from year-to-year. The
Remuneration Committee notes that the pay ratios for 2022 reflect the fact that the CEO waived most of his remuneration
for the financial year. Furthermore, the Committee believes that THG’s reward policies are not only aligned with the Group’s
shared values and culture but also incentivise and drive the right behaviours and ensure all employees are rewarded fairly
and competitively for their contribution to the Group’s success. For these reasons, the Committee is satisfied that the
median pay ratio is consistent with the Group’s pay, reward and progression policies.
THG PLC is the parent company of the Group and, with the exception of the Executive Directors, does not have any
employees. The pay ratio figures have therefore been calculated with reference to the Group’s UK workforce which, the
Company believes, is the appropriate comparator being reflective of the wider policies in operation on employee pay,
reward and progression across the vast majority of the Group’s overall workforce.
153
154
Annual Report 2022
Relative importance of spend on pay
The following table details Shareholder distributions and THG expenditure on total employee pay for the 2022 reporting
period versus the prior year, together with the percentage change year-on-year.
Implementation of Remuneration Policy for the 2023 financial year
The Remuneration Committee proposes to implement the Remuneration Policy for the financial year ending 31 December
2023 as set out below.
2022 (£m)
2021 (£m)
%age change
Base salary
Profit distributed by way of dividend
0
Total spend on remuneration
336.3
0
305.3
n/a
10.16
Base salaries have been reviewed considering individual performance and competitive practice for similar roles in the
Group’s remuneration peer group, together with remuneration awards within the Group itself, and the Remuneration
Committee has concluded there will be no increase in the Executive Directors’ salaries. Therefore, for the financial year
ending 31 December 2023, base salaries will be as follows:
Shareholder dilution
Any share incentive plans (including The THG PLC 2022 Executive LTIP) post-IPO will be operated in line with the Investment
Association’s Principles of Remuneration which require that commitments under all share schemes satisfied by newly issued
ordinary shares must not exceed 10% of the issued ordinary share capital in any rolling ten-year period, of which up to 5% may
be used to satisfy options under executive share schemes.
As detailed in the 2021 Annual Report and as set out in the Company’s published Prospectus, it was intended that any future
share awards to Group employees (excluding the Executive Directors), for the purpose of making employee incentive awards,
would be satisfied out of the previously authorised but unissued maximum of 9,917,601 F Shares and 14,889,292 G Shares (i.e.
a total of 24,806,893 Shares), following admission of the Ordinary Shares to trading on the London Stock Exchange. During
2022 awards were made using 24,128,750 of these F Shares and G Shares to in excess of 500 employees (excluding Executive
Directors). As these Shares were already reflected in the fully diluted share capital of the Company, their issuance does not
affect overall dilution and thus they have not been included in the dilution percentage which follows.
In October 2022 19,074,902 Ordinary Shares were admitted to trading on the London Stock Exchange to further satisfy
employee incentive awards and ensure the Group continues to attract and retain world-class talent. This new issue of Ordinary
Shares represented 1.51% of the Company’s ordinary issued share capital as at 31 December 2022. To date no Ordinary Shares
have been issued to Executive Directors under any executive schemes.
Shareholder voting at 2022 AGM
At the 2022 AGM the resolutions to approve: the Directors’ Remuneration Report; the changes to the Remuneration Policy;
and the adoption of The THG PLC 2022 Executive LTIP were passed as follows:
Resolution
Votes for
%age of
votes cast
Votes
against
%age of
votes cast
Total
votes cast
%age of
ISC voted
Votes
withheld
• Matthew Moulding: £750,000;
•
•
Damian Sanders: £500,000; and
John Gallemore: £450,000.
Pension
There is no change in the contribution percentage for Executive Directors for the financial year ending 31 December 2023
and it remains at 3% of pensionable salary. Pensionable salary is determined in line with the approach taken for the Group’s
wider workforce, which is currently in line with auto-enrolment levels.
Benefits
There is no change in benefits provisions for Executive Directors for the financial year ending 31 December 2023.
Annual bonus
In line with the Remuneration Policy, the maximum opportunity for the financial year ending 31 December 2023 will be:
• Matthew Moulding: 100% of base salary;
•
•
Damian Sanders: 100% of base salary; and
John Gallemore: 100% of base salary.
The measures and weightings for the 2023 financial year will be:
•
•
•
•
Group Sales (20%);
Group adjusted EBITDA (30%);
Free Cash Flow (25%); and
Strategic objectives including ESG metrics (25%).
To approve the Directors’
Remuneration Report (excluding
the Remuneration Policy)
To approve the changes
to the Remuneration Policy
To approve the adoption
of The THG PLC 2022
Executive LTIP
718,217,975
99.88
885,296
0.12
719,103,271
58.88
14,538,630
The specific targets are considered commercially sensitive and will be disclosed in next year’s Annual Report on Remuneration.
718,254,407
99.88
827,864
0.12
719,082,271
58.88
14,559,630
LTIP
718,241,430
99.88
859,927
0.12
719,101,357
58.88
14,540,544
In line with the Remuneration Policy approved at the 2022 AGM, the Remuneration Committee intends to grant a LTIP
award to Damian Sanders and John Gallemore during the 2023 financial year equal to 250% of base salary. This award will
vest three years after grant and will be subject to a further two-year holding period. The award will be subject to stretching
financial and strategic performance conditions which will be disclosed at the time of grant.
155
156
Annual Report 2022
NED fees
A review of the fees paid to NEDs has been undertaken and consequently no increase in fees is proposed for the 2023
financial year. Accordingly, annual NED fees will remain at the following levels:
Financial Statements
NED fee type
Fee for Independent Chair
Base fee for independent NEDs
Base fee for non-independent NEDs
Additional fee for chairing each of Audit, Risk, Remuneration and Sustainability Committees
Additional fee for chairing each of Related Party and Nomination Committees
Additional fee for membership of each of Audit, Risk, Related Party, Nomination, Remuneration
and Sustainability Committees
Fee
£400,000
£70,000
£35,000
£12,000
£8,000
£5,000
Advisers to the Remuneration Committee
PricewaterhouseCoopers LLP (“PwC”) remain engaged as the Remuneration Committee’s independent remuneration
advisers, having been appointed prior to Admission by the then Remuneration Committee Chair. PwC is a member of the
Remuneration Consultants Group, the professional body for remuneration consultants, and adheres to its Code of Conduct.
The Remuneration Committee is satisfied that the advice provided by PwC during the 2022 reporting period was objective
and independent and, whilst separate teams within PwC also advise the Company on matters of tax, corporate governance
and operations, the Remuneration Committee is further satisfied that these activities do not compromise the independence
or objectivity of the advice it receives from PwC as Remuneration Committee advisers.
During the 2022 reporting period PwC provided general support to the Remuneration Committee and guidance on developments
in remuneration governance and best practice, including associated implications for THG. PwC further advised on:
•
•
•
•
•
the 2021 Directors’ Remuneration Report and the proposed amendments to the Remuneration Policy presented therein;
the remuneration package for the new Independent Chair;
the remuneration package for the new CFO;
the design and implementation of the new Employee Incentive Plan; and
appropriate performance metrics for 2023 incentive arrangements.
Fees charged by PwC for advice provided to the Remuneration Committee for the financial year ended 31 December 2022
amounted to £78,500 (excluding VAT).
On behalf of the Remuneration Committee
Dean Moore
Chair of the Remuneration Committee
17 April 2023
157
158
Annual Report 2022
Independent Auditor's Report
to the Members of THG PLC
Opinion
In our opinion:
•
•
THG plc’s Group financial statements and parent
company financial statements (the “financial
statements”) give a true and fair view of the state of
the Group’s and of the parent company’s affairs as at
31 December 2022 and of the Group’s loss for the year
then ended;
•
•
the Group financial statements have been properly
prepared in accordance with UK adopted international
accounting standards;
the parent company financial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
We have audited the financial statements of THG plc (the ‘parent company’) and its subsidiaries (the ‘Group’) for the year
ended 31 December 2022 which comprise:for the year ended 31 December 2021 which comprise:
Group
Parent company
Consolidated statement of comprehensive income
for the year ended 31 December 2022
Company balance sheet as at 31 December 2022
Consolidated statement of financial position
as at 31 December 2022
Company statement of changes in equity
for the year ended 31 December 2022
Consolidated statement of changes in equity
for the year ended 31 December 2022
Related notes 1 to 8 to the financial statements
including a summary of significant accounting policies
Consolidated statement of cash flows
for the year ended 31 December 2022
Related notes 1 to 29 to the financial statements,
including a summary of significant accounting policies
The financial reporting framework that has been applied
in the preparation of the Group financial statements is
applicable law and UK adopted international accounting
standards. The financial reporting framework that has
been applied in the preparation of the parent company
financial statements is applicable law and United Kingdom
Accounting Standards, including FRS 101 “Reduced
Disclosure Framework” (United Kingdom Generally
Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We
are independent of the group and parent company in
accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to
going concern
In auditing the financial statements, we have concluded
that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements
is appropriate. Our evaluation of the directors’ assessment
of the Group and parent company’s ability to continue to
adopt the going concern basis of accounting included:
• We have documented and evaluated the process
followed by management to prepare the forecasts
which they have used in their going concern
assessment.
• We audited the forecasts underpinning the going
concern model which are based on the Board-
approved budget, including checking the arithmetical
accuracy and appropriateness of management’s base
case forecast over the going concern assessment
period to 30 April 2024.
• We challenged the reasonableness of the key
assumptions such as the revenue growth rate
and EBITDA margin achieved by the Group used
within the scenarios and validated to supporting
documentation where appropriate.
• We read and evaluated the Group’s lending
agreements to ascertain any financial or non-financial
covenant restrictions which are in place.
• We obtained management’s schedule of loan facilities
and covenants thereon for the going concern period.
We confirmed that loan repayments have been
appropriately included within management’s forecasts
to the extent they are due in the period. We assessed
the forecast compliance of each covenant throughout
the going concern period under each scenario
presented by management which included drawing
funds from the facility.
• We verified the cash positions as at 31 December
2022 and 31 March 2023 to bank statements.
• We compared the forecast results for the year to date to 31
March 2023 to management accounts and flash results.
• We identified additional stress tests that were then
run by management to determine the impact of
changing some of management’s key assumptions
on the going concern assessment. These key
assumptions were in relation to: the revenue growth
rate, and a reduction in the EBITDA margin achieved
by the Group, all of which would impact the liquidity
headroom in the going concern period. Covenant
compliance only becomes relevant if the business
draws down on more than 40% of the existing RCF
facilities. Management performed these stress tests
by sensitising for each key assumption individually
based on their expectation of a reasonable downside
scenario for that assumption, and then prepared a
reverse stress test by sensitising multiple assumptions
in order to reduce headroom to nil. We then evaluated
the likelihood of the scenario that would reduce
headroom to nil.
• We evaluated THG’s ability to undertake mitigating
actions should it experience a severe downside
scenario, considering likely achievability of both
quantum and timing of those actions.
• We reviewed the appropriateness of management’s
going concern disclosure in describing the risks
associated with its ability to continue to operate as a
going concern until 30 April 2024.
•
The audit procedures on going concern were
supervised and directed by the audit engagement
partner and senior members of the team.
Our key observations in relation to the work performed are:
•
•
In management’s base case and plausible downside
scenarios the Group retained headroom on forecast
cash and covenant compliance throughout the going
concern assessment period. Nor the base case
or sensitised scenario does not assume any draw
down of the RCF. The lowest level of cash headroom
identified is £253.9m in management’s downside
scenario, this cash headroom position includes a
40% drawdown of funds from the RCF facility of £170m
(less amounts ringfenced for supply chain financing)
which expires in December 2024, in addition to
cash balances.
Cash balances as at 31 December 2022 total £474m.
The Group is projected to meet all of its covenant
tests (which only apply when the Group draws down
on more than 40% of the RCF facilities) throughout
the forecast period after applying sensitivities and
stress testing modelled by management except for
the reverse stress test which was designed to identify
which assumptions would eliminate headroom in
the model.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Group and parent company’s
ability to continue as a going concern for the period to
30 April 2024.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report. However, because not all future
events or conditions can be predicted, this statement is not
a guarantee as to the Group’s or parent company’s ability to
continue as a going concern.
159
160
Annual Report 2022
Overview of our audit approach
Key audit matters
Independent auditor's report to the members of THG PLC (continued)
Audit scope
We performed an audit of the complete financial information of 1 component and audit procedures
on specific balances for a further 2 components.
The components where we performed full or specific audit procedures accounted for 100% of loss
before tax (review scope components contained a profit), 98% of revenue, 98% of total expenses
and 99% of total assets.
Key audit matters
•
•
•
•
Revenue recognition
Impairment of intangible assets
Accounting for platform development costs
Significant disclosures
Materiality
Overall Group materiality of £9.2m which represents 0.4% of total revenue.
An overview of the scope of the
parent company and Group audits
EY component team to perform specified procedures on
a newly acquired component in the US. The work on this
component has been performed by the Group audit team in
the current year.
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and
our allocation of performance materiality determine our audit
scope for each company within the Group. Taken together,
this enables us to form an opinion on the consolidated
financial statements. We take into account size, risk profile,
the organisation of the Group and effectiveness of group-
wide controls (including centralised IT systems), changes in
the business environment and other factors such as recent
internal audit results when assessing the level of work to
be performed at each component. We assessed the control
environment and concluded that the most effective approach
to the audit was a substantive and data analytics approach
rather than a controls-based approach.
The scope of the Group audit includes all significant trading
components in the United Kingdom. Full scope components
account for 91% of the Group’s revenue, 92% of the Group’s
expenses, and 94% of the Group’s total assets. Specific scope
components account for 7% of the Group’s revenue, 6% of the
Group’s expenses, and 5% of the total assets. We performed
specified or analytical audit procedures on the other
components. All audit work performed for the purposes
of the Group audit was undertaken by the Group audit team.
Changes from the prior year
There are no significant changes to our scoping from
the 2021 Group audit.
Involvement with component teams
There is no involvement of component teams, all audit work
performed for the purposes of the audit was undertaken by
the Group audit team only. In the prior year, we involved an
161
Climate change
There has been increasing interest from stakeholders as
to how climate change will impact THG plc. The Group
has determined that the principal impact will be through
transition and physical risks as described in the TCFD
section on pages 79-82 and in the Sustainability report,
as well as on page 91 within the principal risks and
uncertainties, which form part of the “Other information,”
rather than the audited financial statements. Our procedures
on these disclosures therefore consisted solely of considering
whether they are materially inconsistent with the financial
statements or our knowledge obtained in the course of the
audit or otherwise appear to be materially misstated.
Our audit effort in considering climate change was focused
on ensuring that the effects of climate risks have been
appropriately considered when modelling future cash
flows. We also challenged the Directors’ considerations of
climate change in their assessment of Going concern and
viability and associated disclosures including the Groups
disclosure of its assessment of climate change within the
critical accounting judgements and estimates section of the
Groups accounting policies on page 183.
Whilst the Group has stated its commitment to the
aspirations of the Paris Agreement to achieve net zero
emissions by 2030, the Group is currently unable to
determine the full future economic impact on their business
model, operational plans and customers to achieve this and
therefore as set out above the potential impacts are not
fully incorporated in these financial statements.
Based on our work we have not identified the impact of
climate change on the financial statements to be a key
audit matter or to impact a key audit matter.
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether due to fraud) that we identified. These matters
included those which had the greatest effect on the overall
audit strategy, the allocation of resources in the audit;
and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the
financial statements as a whole, and in our opinion thereon,
and we do not provide a separate opinion on these matters.
Risk
Our response to the risk
Revenue recognition
(£2,239m, 2021: £2,180m)
For the risk identified on product revenues we have performed the
following procedures:
Refer to the Audit Committee Report
(page 125); Accounting policies (page 176);
and Note 2 of the Consolidated
Financial Statements.
THG plc has reported revenue of £2,239m
for the year ended 31 December 2022 (2021:
£2,180m).
Revenue is a key metric when evaluating
the performance of the Group and receives
significant scrutiny externally and internally.
Product revenue (D2C/B2B revenue) is
primarily compiled of a large volume of small
value transactions. As the Group makes 28%
of its sales in the final quarter of the year
we have focussed our risk on the final three
months of product sales.
We performed a walkthrough of the product revenue process and assessed the
design effectiveness of key controls.
We considered the presentation of revenue against our understanding of the
contractual arrangements in place.
We adopted a data analytics approach in relation to the majority of product
revenue (£1.9bn of £2.1bn) at full and specific scope components. This
involved tracing a full population of transaction data to cash journals which
demonstrated that materially all of the revenue recognised in the year was
received as cash. A sample of the related cash journals were agreed to
bank statement, to ensure the transactions reflected actual revenue related
cash receipts. For any revenue not received as cash we followed through all
significant items to supporting evidence.
We tested a sample of credit notes issued by the Group after the period end
but within the period of the returns policy (between 28 and 60 days depending
on customer type), to identify whether appropriate provisions for returns were
in place at the year end.
For product revenue (B2B) not tested using the data analytics approach (5%
of total revenues), we have agreed a sample of transactions to invoice, proof of
delivery and subsequent cash receipt.
For product revenue (D2C) from marketplace sales not tested using the
data analytics approach (1% of total revenues), we have agreed a sample of
transactions to the third-party merchant’s transaction and settlement reports,
as well as subsequent cash receipt.
We performed an assessment of cash-in-transit balances and tested them by
agreeing a sample through to cash receipts after the year-end.
We tested material reconciling items within trade receivables and performed a
review of aged amounts within the trade receivables ledger.
We tested manual journals to revenue at in-scope components, understanding
the reasons for the transactions and corroborating them to appropriate audit
evidence. We have tested these journals throughout the year, with increased
focus on those booked in the last quarter of the year where we consider there
to be a heightened risk of manipulation. We have also selected a sample of
transactions at random for further testing to build an element of unpredictability
into our testing.
We performed analytical reviews of revenue for review scope entities and
tested trade receivables to post year end cash receipt wherever trade
receivables were in scope.
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Annual Report 2022
Risk
Our response to the risk
Risk
Our response to the risk
Independent auditor's report to the members of THG PLC (continued)
In regards to the revenue from THG Ingenuity,
the risk we have identified is split across
both product revenues and other revenues
(services, hosting) reported by THG.
As a result, we identified a potential risk
of bias or fraud through management
manipulation by manual adjustments,
especially in the last quarter of the
financial year.
We have identified a potential risk of bias or
fraud through management inappropriately
classifying revenue to THG Ingenuity. We
have also identified a risk of inappropriate
recognition of THG Ingenuity contract revenue
by manipulating the performance obligations
against which revenue is recognised. Our
procedures are responsive to the risk that the
accounting for revenue recognition is not in
line with “IFRS15, Revenue from Contracts
with Customers”.
For the risk identified on Ingenuity and other revenues we performed the
following procedures:
Impairment of intangible assets
£1,276m (2021: £1,506m)
Our procedures to respond to the risk of impairment of intangible
assets included:
We performed a walkthrough of each significant class of revenue transactions
within THG Ingenuity or ‘Other revenue’ and assessed the design effectiveness
of key controls.
For a sample of new contracts, we reviewed the terms of business and
management’s assessment of how IFRS 15 is applied to the contract terms,
including the identification of performance obligations and allocation of
consideration to each performance obligation identified. We assessed the
status of the project and whether the relevant site had ‘gone live’. Where
these projects were yet to go live, we understood the reasons and considered
whether revenue had been recognised in line with IFRS 15. Our assessment
included, but was not limited to:
•
•
•
•
Variable consideration
Services which have been rendered at nil charge
Principal vs agent considerations
Consideration of whether any contracts contain embedded leases (IFRS 16).
For a sample of existing contracts, we enquired of the customer managers as
to whether there had been changes in the contract terms, including changes in
performance obligations and allocation of consideration to each performance
obligation identified.
We tested a sample of other revenue transactions, agreeing the amounts to
invoice, proof of service or cash receipt. For the items selected we tested that
the correct amount of deferred revenue has been recognised at year-end. For
these items we also tested the classification of the revenue by segment.
We challenged management on the classification of revenue as ‘Infrastructure’
and ‘Commerce’ revenue and ensured that different elements of THG Ingenuity
are clearly articulated given external interest in this business.
We tested manual revenue journals at in-scope locations, understanding
the reasons for the transactions and corroborating to appropriate evidence.
We tested these journals throughout the year, with increased focus on
those booked in the last quarter of the year where we consider there to be a
heightened risk of manipulation. We also selected a sample of transactions at
random to build in an element of unpredictability to our testing.
Refer to the Audit Committee Report
(page 126); Accounting policies (page 178);
and Note 11 of the Consolidated
Financial Statements.
The Group’s legal structure was reorganised
during the financial year and as a result of
this there has been a change in the number
of CGUs (“cash-generating units”) identified
by management for the purposes of their
year-end impairment assessment. £1.1bn of
the Group’s intangible assets is contained
within two of the identified CGU’s (THG
Beauty and THG Ingenuity). There is a risk
that these assets recoverable value are below
the carrying amount.
We reviewed the basis for the identification of CGUs and concluded that
management’s identified CGUs were appropriate.
We assessed management’s calculation of the discount rate (for each
CGU) and agreed assumptions and peer Group analysis to supporting
documentation in order to ensure that the discount rate used is appropriate
and specific to that CGU.
We challenged the reasonableness of the forecasts used in the assessment
including key assumptions (such as growth rates, EBITDA margins and
discount rates).
We assessed the reliability of management’s forecasts by comparing
previous forecasts to actual results.
We assessed the sensitivities of the headroom to changes in key
assumptions.
We engaged an EY internal expert to review the discount rates applied by
management to forecast cashflows.
We considered analysts’ views on the valuation of the Group with EY
internal expert input to assess if this provided contradictory evidence to
management’s assessment of the value of the Group, and each of its CGUs.
We assessed the impairment disclosure presented by management
and ensured this was in accordance with the requirements of ‘IAS 36
Impairment of Assets’ and ‘IFRS 13 Fair Value Measurement’.
We compared the disclosure with the key assumptions we have audited and
ensured these were consistent and that appropriate sensitivities have been
disclosed.
Key observations communicated to the Audit Committee
We have highlighted to the Audit Committee the sensitivity of the THG Beauty and THG Ingenuity CGU’s (and the
disclosed impairment charges) to reasonably possible changes in key assumptions such as the revenue growth rate and
the discount rate. Management have considered this in the specific risk premiums adopted in their discount rate, the final
impairment charge recorded and the disclosures adopted in the Annual Report and Accounts.
Key observations communicated to the Audit Committee
Through our audit procedures on product revenue, we identified a reclassification for discounts amounting to £17m
between revenue and cost of sales – this has been corrected by management. Based on the audit procedures performed,
we did not identify further evidence of material misstatements in the revenue recognised in the current year. We have
highlighted to the Audit Committee the importance of ensuring that there is clear disclosure regarding classification of
revenues, including any changes. We are satisfied that the disclosures appropriately describe the classification of revenue
and are also in compliance with IFRS 15.
163
164
Annual Report 2022
Risk
Our response to the risk
Risk
Our response to the risk
Independent auditor's report to the members of THG PLC (continued)
Accounting for platform development costs
£100m (2021: £82m)
Our procedures to respond to the risk on capitalised platform development
costs included:
Refer to the Audit Committee Report
(page 126); Accounting policies (page 178);
and Note 11 of the Consolidated
Financial Statements.
Within capitalised platform development costs
we have identified a risk that management
and other employee time is capitalised that
does not represent incremental value/future
economic benefits.
We performed a walkthrough of significant classes of transactions
associated with platform development costs and understood the relevant
controls.
We interviewed members of the finance team to understand what they do
to ensure only direct costs are capitalised.
We tested a sample of employee timesheets and made inquiries to
understand the nature of their activities and of the project to which their
time had been recorded.
We tested a sample of key projects and made inquiries of the project
managers to understand the nature, timing and purpose of the project.
We assessed whether the capitalisation of these employees / projects was
consistent with the requirements of ‘IAS 38 Intangible Assets’ and ‘SIC 32 –
Intangible Assets – Web Site Costs’.
We reviewed for risk of management bias, particularly in respect of
employees who do not use timesheets.
We reviewed for any significant new projects or changes in judgments
made prior to the year end.
We exercised professional scepticism and performed an unusual phrase
search on the ledger to identify any operational costs incorrectly capitalised.
We performed a trend analysis to assess any unusual fluctuation in the
pattern of time capitalised on a month-on-month basis.
We made inquiries of the Chief Technology Officer to corroborate our
understanding of process and the controls in place to ensure capitalised
projects delivered expected results and whether there is appropriate
oversight of new projects in place to ensure they meet relevant criteria
of IAS 38.
Key observations communicated to the Audit Committee
We reported certain control observations to the Audit Committee which have been acknowledged. Based on the
procedures we have performed we did not identify material misstatements in the capitalised platform development costs
carried in the statement of financial position.
Significant disclosures
Refer to the Audit Committee Report
(page 126); Accounting policies (page 183).
This risk focuses on the more complex or
subjective disclosure items within the ARA
(“Annual Report and Accounts”), which we
consider to be:
• Whether the accounts when taken
as a whole are fair, balanced and
understandable
•
•
•
•
Disclosures relating to impairment
Adjusted profit measures
Related party transactions
Narrative related to Ingenuity, and
presentation of segmental reporting
(including the impact of IFRS 5
discontinued operations)
We have considered the areas currently
focussed on by investors, analysts and the
wider market. There is a risk that the accounts
may be presented in a way that does not give
a fair reflection of the business, transactions
and/or is not understandable to the external
users of the financial statements.
We performed the following procedures on the significant disclosure items
noted:
Whether the accounts when taken as a whole are fair, balanced
and understandable
We understood the process that the Board and those charged with governance
implemented to ensure the ARA is fair, balanced and understandable.
In reviewing the ARA we gave specific consideration to whether the business
model and Group’s purpose was clear to the readers of the financial
statements. We also involved a corporate governance specialist to perform an
assessment of the ARA with particular focus on whether it is in compliance
with the UK Corporate Governance code and to enhance our audit challenge
on the ARA and the adequacy of the disclosures made.
We read the disclosures and challenged management to ensure there was an
appropriate balance between the narrative on mature businesses and fast-
growing aspects of the Group’s performance, as well as giving greater clarity on
underlying organic performance.
Disclosures relating to impairment
We assessed the impairment disclosure presented by management and
ensured this was in accordance with the requirements of IAS 36 and IFRS 13.
We compared the disclosure with the key assumptions we have audited and
ensured these were consistent and that appropriate sensitivities have been
disclosed.
Adjusted profit measures (APMs)
Our focus was on ensuring that narrative within the ARA does not give undue
prominence to APMs.
Where APMs are disclosed we checked consistency with the Group’s
accounting policy and ensured that the APM is reconciled to the nearest
GAAP measure.
We performed an assessment of the calculations prepared by management to
quantify the adjustment items. We challenged management on the sufficiency
of disclosures which describe the nature of the adjusted items and checked
they were in line with our understanding of the nature of these items based on
this assessment.
We selected a sample of adjusted items and agreed these costs to invoices
where relevant.
165
166
Annual Report 2022 Risk
Our response to the risk
Related party transactions
We walked through and understood the design effectiveness of the governance
and controls management and those charged with governance have put in
place to review and approve transactions with related parties.
We assessed the appropriateness of modifications made to existing related
party relationships and contracts to assess whether they were at an
arms’ length.
We ensured capital expenditure was accounted for by the right entity based
on the terms of the leases.
We read board and committee meeting minutes (including of the Related Party
Committee) to identify related party transactions.
We inspected significant related party contracts.
We performed journal entry testing to assess for the completeness of related
party transactions.
We assessed whether significant related party transactions are on a fair market
basis, or that those that are not on a fair market basis are not material to the
financial statements.
We reviewed other information in the public domain to assess whether
this provided evidence over the completeness of related party transactions
identified by management or contra evidence to our conclusions.
We made inquiries of, and held discussions with, management and those
charged with governance, to identify whether related party transactions
are in accordance with the terms and conditions of the contracts.
We ensured appropriate disclosure of all related party transactions in the
financial statements.
Narrative related to the Ingenuity business, and presentation of
segmental reporting (including IFRS 5 discontinued operations)
We considered whether narrative related to the Ingenuity business was in line
with our understanding of our contract testing (see revenue section above).
We reviewed judgements on segments and ensured that reportable segments
were disclosed appropriately in accordance with IFRS 8. We ensured that
the presentation of results for THG OnDemand and Luxury in the segmental
reporting note to the financial statements was in line with authoritative
guidance on discontinued operations.
Key observations communicated to the Audit Committee
There is significant judgment in management’s determination of adjusted items and therefore the clarity of the disclosure
is essential for readers of the financial statements to understand the items.
The disclosures for related party transactions have been made in accordance with ‘IAS 24 Related Party Transactions’.
In 2021 we reported control deficiencies in relation to related party transactions. During the year, management have
implemented controls to remediate the reported deficiency.
Overall we concluded that the Annual Report and Accounts, when taken as a whole, is considered to be Fair, Balanced
and Understandable.
Independent auditor's report to the members of THG PLC (continued)
In the prior year, our auditor’s report included a key audit
matter in relation to ‘Valuation of Intangibles’ which
incorporated our risks on acquisition accounting; capitalisation
of platform development costs and impairment of intangibles.
However in the current year, we have only considered
impairment of intangibles and accounting for platform
development costs as key audit matters given the significance
of the judgements taken, impact on the financial statements
and the time and resources allocated to these risk areas by the
audit team.
The Group has made no acquisitions in the current year
(ten in FY21, total spend £0.8bn) and as such this has not been
determined to be a key audit matter in 2022.
Our application of materiality
We apply the concept of materiality in planning and
performing the audit, in evaluating the effect of identified
misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that,
individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users
of the financial statements. Materiality provides a basis for
determining the nature and extent of our audit procedures.
We determined materiality for the Group to be £9.2m (2021:
£8.7m), which is 0.4% (2021: 0.4%) of Group revenue. Based
on our review of analysts’ commentary, we believe that
revenue is the most important benchmark for users of the
financial statements. The increase in materiality is driven by
the increase in revenue which is the basis for materiality.
We determined materiality for the parent company to be
£9.2m (2021: £7.6m), which is 1% of equity (2021: 1% of equity),
capped at Group materiality.
During the course of our audit, we reassessed initial materiality
set at the planning stage of the audit, but did not need to
change the amount nor basis of materiality.
Performance materiality
the range of performance materiality allocated to components
was £0.9m to £4.0m (2021: £0.7m to £3.8m), excluding
performance materiality for the parent company.
Reporting threshold
An amount below which identified misstatements are
considered as being clearly trivial.
We agreed with the Audit Committee that we would report
to them all uncorrected audit differences in excess of £0.50m
(2021: £0.26m), which is set at 5% (2021: 3%) of planning
materiality, as well as differences below that threshold that,
in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both
the quantitative measures of materiality discussed above and
in light of other relevant qualitative considerations in forming
our opinion.
Other information
The other information comprises the information included
in the annual report, including the strategic report and the
directors’ report, other than the financial statements and our
auditor’s report thereon. The directors are responsible for the
other information contained within the annual report. Our
opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly
stated in this report, we do not express
any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit or otherwise appears
to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based
on the work we have performed, we conclude that there
is a material misstatement of the other information, we are
required to report that fact.
We have nothing to report in this regard. We refer to the
section concerning our identified key audit matter on
Significant Disclosures.
On the basis of our risk assessments, together with our
assessment of the Group’s overall control environment, our
judgement was that performance materiality was 50% (2021:
50%) of our planning materiality, namely £4.6m (2021: £4.4m).
We have set performance materiality at this percentage due to
the level of errors identified through the course of the 2021 audit.
Audit work of components for the purpose of obtaining audit
coverage over significant financial statement accounts is
undertaken based on a percentage of total performance
materiality. The performance materiality set for each
component is based on the relative scale and risk of the
component to the Group as a whole and our assessment of
the risk of misstatement at that component. In the current year,
Corporate governance statement
As THG plc have voluntarily complied with the UK Corporate
Governance Code, we are required to review the directors’
statement in relation to going concern, longer-term viability
and that part of the Corporate Governance Statement relating
to the Group and company’s compliance with the provisions
of the UK Corporate Governance Code specified for
our review.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent
167
168
Annual Report 2022
with the financial statements or our knowledge obtained
during the audit:
in the course of the audit, we have not identified material
misstatements in:
• Directors’ statement with regards to the appropriateness
of adopting the going concern basis of accounting and
any material uncertainties identified set out on page 93;
•
•
• Directors’ explanation as to its assessment of the
company’s prospects, the period this assessment covers
and why the period is appropriate set out on page 93;
• Directors’ statement on fair, balanced and understandable
set out on page 127;
•
•
•
Board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks set out on
pages 86-87;
The section of the Annual Report and Accounts that
describes the review of effectiveness of risk management
and internal control systems set out on page 83; and;
The section describing the work of the Audit Committee
and Risk Committee set out on page 123 and 130.
Opinions on other matters prescribed
by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
•
•
•
the information given in the strategic report and the
directors’ report for the financial year for which the
financial statements are prepared is consistent with
the financial statements and those reports have
been prepared in accordance with applicable legal
requirements;
the information about internal control and risk
management systems in relation to financial reporting
processes and about share capital structures, given in
compliance with rules 7.2.5 and 7.2.6 in the Disclosure
Rules and Transparency Rules sourcebook made
by the Financial Conduct Authority (the FCA Rules),
is consistent with the financial statements and has
been prepared in accordance with applicable legal
requirements; and
information about the company’s corporate governance
statement and practices and about its administrative,
management and supervisory bodies and their
committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of
the FCA Rules.
Matters on which we are
required to report by exception
In the light of the knowledge and understanding of the Group
and the parent company and its environment obtained
169
the strategic report or the directors’ report; or
the information about internal control and risk
management systems in relation to financial reporting
processes and about share capital structures, given in
compliance with rules 7.2.5 and 7.2.6 of the FCA Rules.
We have nothing to report in respect of the following matters
in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
•
•
•
•
•
adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
the parent company financial statements and the part of
the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified
by law are not made;
we have not received all the information and
explanations we require for our audit; or
a Corporate Governance Statement has not been
prepared by the company.
Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement set out on page 103, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to
enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group and company’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate
the Group or the company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the
audit of the financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
Independent auditor's report to the members of THG PLC (continued)
Explanation as to what extent
the audit was considered
capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in
line with our responsibilities, outlined above, to detect
irregularities, including fraud. The risk of not detecting a
material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion. The extent to
which our procedures are capable of detecting irregularities,
including fraud is detailed below.
However, the primary responsibility for the prevention
and detection of fraud rests with both those charged with
governance of the company and management.
• We obtained an understanding of the legal and
regulatory frameworks that are applicable to the Group
and determined that the most significant are those that
relate to the reporting framework (IFRS, Companies
Act 2006, the UK Corporate Governance Code, and
the Listing Rules of the UK Listing Authority) and the
relevant tax compliance regulations in the jurisdictions
in which THG PLC operates. In addition, we concluded
that there are certain significant laws and regulations
that may have an effect on the determination of the
amounts and disclosures in the financial statements
and those laws and regulations relating to health and
safety, employee matters, environmental, and bribery and
corruption practices.
• We understood how THG PLC is complying with those
frameworks by making enquiries of management,
internal audit, those responsible for legal and
compliance procedures and the Company Secretary. We
corroborated our enquiries through our review of Board
minutes, internal audit reports and papers provided to
the Audit and Risk Committee.
• We assessed the susceptibility of the Group’s financial
statements to material misstatement, including how
fraud might occur. We identified fraud risks in our
work on adjusted items and revenue recognition and
performed specific procedures which were responsive to
the identified fraud risks.
•
Based on this understanding we designed our audit
procedures to identify non-compliance with such laws
and regulations. Our procedures involved journal entry
testing, with a focus on manual consolidation journals
and journals indicating large or unusual transactions
based on our understanding of the business; performing
inquiries of internal and external legal counsel; reviewing
material items within the Group’s legal expenses; and
reviewing media coverage of the Group to identify
whether there were matters that had not been brought
to our attention through discussions with management.
In addition, we completed procedures to conclude on
the compliance of the disclosures in the Annual Report
and Accounts with the requirements of the relevant
accounting standards, UK legislation and the UK
Corporate Governance Code 2018. We also engaged
EY forensics specialists to assist with the performance of
our procedures around compliance with applicable laws
and regulations.
A further description of our responsibilities for the audit
of the financial statements is located on the
Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Other matters we are required
to address
•
•
•
•
Following the recommendation from the board, we were
appointed by the company in 2021 to audit the financial
statements for the year ending 31 December 2022 and
subsequent financial periods.
The period of total uninterrupted engagement including
previous renewals and reappointments is 11 years,
covering the years ending 31 December 2011 to 31
December 2022.
The non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the Group or the parent
company and we remain independent of the Group and
the parent company in conducting the audit.
The audit opinion is consistent with the additional report
to the audit committee.
Use of our report
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the company’s members those matters
we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Karl Havers
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP,
Statutory Auditor
London
17 April 2023
170
Annual Report 2022
Consolidated statement of comprehensive income for the year ended
31 December 2022
Consolidated statement of financial position as at 31 December 2022
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative costs
Operating loss
Finance income
Finance costs
Loss before taxation
Income tax credit
Loss for the financial year
Other comprehensive (expense) / income
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translating foreign operations, net of tax
Net gain in cash flow hedges
2022
Total
£’000
2021
Total
£’000
Note
2
2,239,229
2,179,910
(1,359,254)
(1,225,506)
879,975
(402,769)
(972,771)
(495,565)
2,359
(56,522)
(549,728)
9,771
(539,957)
3
8
8
9
954,404
(429,940)
(661,927)
(137,463)
623
(49,447)
(186,287)
48,213
(138,074)
62,953
9,753
(272)
11,391
Total comprehensive expense for the financial year
(467,251)
(126,955)
Basic and diluted loss per share (£)
26
(0.44)
(0.13)
Adjusted EBITDA
Operating loss
Adjustments for:
Share-based payments
Adjusted items - impairment
Adjusted items - other
Depreciation
Amortisation
Adjusted EBITDA1
Notes
7
4
4
12.1,22
11
2022
£’000
2021
£’000
(495,565)
(137,463)
10,734
275,422
70,357
94,191
108,975
64,114
-
55,990
73,238
70,478
99,033
161,276
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Investments
Other financial assets
Current assets
Assets held for sale
Inventories
Trade and other receivables
Other financial assets
Current tax asset
Cash and cash equivalents
Total assets
Equity
Ordinary shares
Share premium
Merger reserve
Capital redemption reserve
Hedging reserve
Cost of hedging reserve
FX reserve
Retained earnings
Non-current liabilities
Borrowings
Other financial liabilities
Lease liabilities
Provisions
Deferred tax
Current liabilities
Contract liability
Trade and other payables
Borrowings
Current tax liability
Lease liabilities
Provisions
Other financial liabilities
Total liabilities
Total equity and liabilities
31 December
2022
31 December
2021
Note
£’000
£’000
11
12.1
22
14
12.2
13
15
14
16
23
18
14
22
19
21
20
17
18
22
19
14
1,275,762
360,041
294,309
1,400
21,567
1,953,079
21,397
373,271
264,949
301
2,377
473,783
1,136,078
3,089,157
6,903
2,024,452
615
523
(6,221)
16,704
61,859
(803,096)
1,301,739
648,197
4,189
290,381
18,840
76,598
1,038,205
34,256
636,440
30,992
-
43,995
3,530
-
749,213
1,787,418
1,506,292
335,620
310,282
1,400
-
2,153,594
-
466,781
263,929
2,700
-
536,827
1,270,237
3,423,831
6,684
2,022,311
615
523
(12,964)
13,694
(1,094)
(274,015)
1,755,754
489,113
-
305,831
15,623
73,766
884,333
36,143
676,563
752
4,118
43,342
883
21,943
783,744
1,668,077
3,089,157
3,423,831
1. Adjusted EBITDA is defined as operating profit before depreciation, amortisation, share-based payments and adjusted items.
The results for the year are derived from continuing activities.
The comprehensive expense is 100% attributable to the owners of the Parent Company.
171
The financial statements on pages 171-223 were approved by the
Board of Directors on 17 April 2023 and were signed on its behalf by
Damian Sanders
Chief Financial Officer
Registered number: 06539496
172
Annual Report 2022
Consolidated statement of changes in equity for the year ended
31 December 2022
Consolidated statement of cash flows for the year ended
31 December 2022
Cash flows from operating activities before adjusted cash flows
Cash generated from operations
Income tax paid
Net cash generated from operating activities
before adjusted cash flows
Cash flows relating to adjusted items
Net cash generated from operating activities
Cash flows from investing activities
Note
25
2022
£’000
87,642
(4,857)
82,785
(45,071)
37,714
2021
£’000
95,954
(7,095)
88,859
(65,528)
23,331
Acquisition of subsidiaries net of cash acquired
10
(5,691)
(768,490)
Ordinary
shares
Share
premium
Merger
reserve
Capital
Redemption
reserve
FX
reserve
Hedging
reserve
Cost of
Hedging
reserve
Retained
earnings
Total equity
Note
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Balance at 1 January 2021
6,061
1,287,171
615
523
(822)
(18,003)
7,342
(138,361)
1,144,526
Loss for the year
Other comprehensive
expense:
Impact of foreign exchange
Movement on hedging
instruments
Total comprehensive
(expense) / income for
the year
Issue of ordinary share
capital
-
-
-
-
-
-
-
-
623
735,140
Deferred tax effect in equity
21
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(272)
-
-
-
-
-
5,039
6,352
(138,074)
(138,074)
-
-
(272)
11,391
(272)
5,039
6,352
(138,074)
(126,955)
-
-
-
-
-
-
-
735,763
2,420
2,420
Balance at 31 December
2021
6,684
2,022,311
615
523
(1,094)
(12,964)
13,694
(274,015)
1,755,754
Balance at 1 January 2022
6,684
2,022,311
615
523
(1,094)
(12,964)
13,694
(274,015)
1,755,754
-
-
-
-
-
-
-
-
219
2,141
7
21
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
62,953
-
-
-
-
-
6,743
3,010
-
-
62,953
9,753
62,953
6,743
3,010
(539,957)
(467,251)
-
-
-
-
-
-
-
-
-
-
2,360
10,734
10,734
142
142
6,903
2,024,452
615
523
61,859
(6,221)
16,704
(803,096)
1,301,739
Loss for the year
Other comprehensive
income:
Impact of foreign exchange
Movement on hedging
instruments
Total comprehensive
income / (expense) for
the year
Issue of ordinary share
capital
Share-based payments
Deferred tax effect in equity
Balance at 31 December
2022
173
(539,957)
(539,957)
Net cash used in investing activities
Purchase of investments
Purchase of property, plant and equipment
Purchase of intangible assets
Interest received
Cash flows from financing activities
Proceeds from issuance of ordinary shares net of fees
Interest paid
Proceeds from bank borrowings
Repayment of lease liabilities
Net cash flow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
8
22
16
-
(94,854)
(81,564)
2,359
(1,400)
(111,553)
(77,620)
323
(179,750)
(958,740)
(73)
(27,923)
156,000
(49,012)
78,992
(63,044)
536,827
473,783
760,230
(25,359)
-
(36,216)
698,655
(236,754)
773,581
536,827
174
Annual Report 2022
Notes to the consolidated financial statements
Basis of preparation
The consolidated financial statements have been prepared
in accordance with UK-adopted international accounting
standards (“IFRS”). The financial statements have been
prepared on the historical cost basis, except for derivatives
which are held at fair value.
The accounting policies adopted by the Group in the
current year are consistent with those adopted during the
year ended 31 December 2021.
There have been no new or amended accounting standards
or interpretations adopted during the year that have had a
significant impact on the Group’s financial statements.
There are no standards, interpretations or amendments to
IFRS that have been issued but are not yet effective that are
expected to have a material impact on the Group’s financial
statements.
Going concern
Accounting standards require that Directors satisfy
themselves that it is reasonable for them to conclude
on whether or not it is appropriate to prepare financial
statements on the going concern basis. There has been no
material uncertainty identified that would cast significant
doubt upon the Group’s ability to continue using the going
concern basis of accounting for the 12 months to April 2024.
The Group’s business activities, together with the factors
likely to affect its future development, performance and
position, are set out in the Strategic Report on pages 3-104.
The Group’s strategic planning cycle includes an annual
Budget process, which is reviewed by the Board. This
planning process involves modelling under a series of
assumptions. Severe but plausible downside scenarios
were also modelled setting out impacts of a combination of
the principal risks, as well as a reverse stress test to identify
what would be required to either breach covenants or run
out of liquidity. This process is led by the Group CFO and
Deputy Group CFO along with the Board and Executive
Chair and CEO providing further direction to align strategic
initiatives. Following the divisional reorganisation of the
business units in the year, more granular information has
been available which has supported decision making
on strategic initiatives. Forecasts have been prepared
on a divisional level. The Directors of the Group review
its Budget periodically, which is revisited and revised as
appropriate in response to evolving market conditions.
In considering the Group’s financial position the Directors
have considered:
•
•
Expected future growth of trading businesses;
The committed and expected pipeline of its
Ingenuity business;
• Margins expected to be achieved in the future; and
• Wider market and industry specific factors.
The Directors have also considered the liquidity of the
Group as well as available facilities and note that as at
the balance sheet date, the Group had a total of £170m in
undrawn facilities, along with £474m readily available cash
held on the balance sheet. Net debt at this date was £515m
(note 18) and net debt of £181m before the inclusion of IFRS
16 lease liabilities.
In December 2019, the Group entered into a €600m seven
year loan facility agreement due to mature in December
2026 and a £170m Revolving Credit Facility (“RCF”) due to
mature in December 2024. During the year an incremental
£156 million export facility was provided by the Group's
existing lenders ranking pari passu with the existing facility.
This new facility expires in October 2025. There are no key
covenants attached to the €600m or £156m facilities which
are drawn down, but the covenants attached to the RCF are
linked to gross debt leverage and become effective when
the facility is drawn upon. This facility is not currently drawn
down, and not forecast to be drawn in the future period.
The Directors are of the opinion that the Group’s forecasts
and projections, which they believe are based on an
appropriate assessment of the market and past experience
taking account of reasonably possible changes in trading
performance given the current market and economic
conditions, show that the Group should be able to operate
within the current facility and comply with its banking
covenants in the event that the RCF facilities are drawn
upon. The Directors have modelled a range of scenarios,
including a base case which has been stress tested
to consider downside risks and a reverse stress test,
over a three-year period. Further details of the Group’s
considerations are provided in the Viability Statement and
Going Concern Statement on page 93.
As a result of the analysis performed, including potential
severe but plausible scenarios, the Board believes that
the Group is able to adequately manage its financing and
principal risks and that the Group will be able to operate
within the level of its facilities and meet the required
covenants for the going concern assessment period. Based
on the above activity, the Directors are satisfied that it
is appropriate to prepare the financial statements of the
Group on a going concern basis.
1. Accounting policies
The Group’s key accounting policies are set out below.
These policies have been prepared on the basis of the
recognition and measurement requirements of IFRS
standards in effect that apply to accounting periods
beginning on or after 1 January 2022 and have been applied
to 2021 comparatives where applicable.
a. Basis of consolidation
The Group financial statements consolidate those of the
Company and all its subsidiary undertakings drawn up to 31
December 2022. Subsidiaries are all entities over which the
Group has control. When the end of the reporting period of
a subsidiary is not 31 December, the subsidiary prepares, for
consolidation purposes, additional financial information as
of the same date as the financial statements of the Group.
All transactions and balances between Group companies
are eliminated on consolidation, including unrealised gains
and losses on transactions between Group companies.
Where unrealised losses on intra-Group asset sales are
reversed on consolidation, the underlying asset is also
tested for impairment from a Group perspective.
Amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the
Group. Profit or loss and other comprehensive income of
subsidiaries acquired or disposed of during the year are
recognised from the effective date of acquisition, or up to
the effective date of disposal, as applicable.
b. Business combinations
Business combinations are accounted for using the
acquisition method under IFRS 3 ‘Business Combinations’.
The consideration transferred by the Group to obtain
control of a subsidiary is calculated as the sum of the
acquisition-date fair values of assets transferred, liabilities
incurred, and the equity interests issued by the Group,
which includes the fair value of any asset or liability arising
from a contingent consideration arrangement. Acquisition
costs are expensed as incurred.
The Group recognises identifiable assets acquired and
liabilities assumed, including contingent liabilities, in a
business combination regardless of whether they have
been previously recognised in the acquiree’s financial
statements prior to the acquisition. Assets acquired and
liabilities assumed are measured at their acquisition-date
fair values. These fair values can be re-assessed for a
period of 12 months from the date of acquisition based on
information available at the date of acquisition.
Goodwill is stated after separate recognition of other
identifiable intangible assets. It is calculated as the excess
of the sum of a) fair value of consideration transferred, b)
the recognised amount of any non-controlling interest
in the acquiree and c) acquisition-date fair value of any
existing equity interest in the acquiree, over the acquisition-
date fair values of identifiable net assets. If the fair values
of identifiable net assets exceed the sum calculated above,
the excess amount (i.e. gain on a bargain purchase) is
recognised in profit or loss immediately.
In determining whether a transaction is a business
combination or an asset purchase, the Group considers
the inputs, processes and outputs acquired in accordance
with IFRS 3.
c. Revenue
Revenue consists primarily of direct to consumer (D2C)
internet sales along with business to business (B2B) sales.
D2C and B2B sales
Identifying performance obligations:
For D2C and B2B sales the performance obligation is the
delivery of the goods purchased by the customer. Control
of goods is transferred upon delivery of the product to the
customer.
Identifying the transaction price:
For D2C sales, the customer pays in full at the point of sale,
with the transaction price allocated to individual goods
purchased. A contract liability is recognised until the related
goods have been delivered. For B2B sales, the customer
pays in line with the agreed credit terms.
Revenue is shown net of returns, with expected sales
returns estimated based on historical return data applied
to sales. These returns are accounted for at the lower
of cost or net realisable value. A right of return asset
(and corresponding adjustment to cost of sales) is also
recognised for the right to recover the goods from the
customer.
Allocation of transaction price to performance obligations:
In general, the whole transaction price is allocated to the
performance obligation. Where a customer purchases
multiple goods within one transaction, the transaction price
is allocated to those goods based on relative stand-alone
selling prices.
Revenue recognition:
Revenue is recognised at the point of time when the
customer receives the goods, shown net of returns.
175
176
Annual Report 2022
Revenue which is invoiced in advance is recorded as a
contract liability on the balance sheet and released to the
statement of comprehensive income account over the
periods in which the services are provided.
Costs associated with obtaining a contract with a customer
that would not have been incurred if the contract had not
been obtained are recognised as an asset where they
are expected to be recoverable and depreciated over the
life of the contract. Costs to obtain a contract that would
have been incurred regardless of whether the contract
was obtained or not are recognised as an expense when
incurred, unless those costs are explicitly chargeable to the
customer regardless of whether the contract is obtained.
Revenue recognised under IFRS 16
Revenues from internet hosting contracts are recognised
under IFRS 16 as the Group is considered a lessor in
these transactions.
Income from hosting contracts is recognised on a straight-
line basis from the commencement date over the lease
term as the performance obligation is settled over the life of
the contract. Any initial direct costs incurred in negotiating
and arranging an operating lease are added to the carrying
amount of the leased asset and recognised over the lease
term on the same basis as rental income.
Revenue from memberships
Fees recognised in respect of memberships are recorded
on a straight-line basis over the membership period.
Barter income
For some of its monthly subscription offerings, THG
receives goods for inclusion in its subscription boxes
from business partners in return for the marketing
exposure received by those products being included in
the subscription box. The goods are recognised as stock
when received and held at their fair value. When the box is
sold, the revenue for providing those marketing services is
recognised with an equal and offsetting entry recorded in
cost of goods sold.
Revenue from contracts
Identification of performance obligations:
THG Ingenuity Commerce contracts often have multiple
performance obligations that include but are not limited
to: creation of digital assets, marketing services, stock
management, fulfilment, customer support services
and access to THG’s Ingenuity platform. Each contract
is reviewed individually once signed and is assessed to
identify the separate performance obligations. In a typical
Ingenuity Commerce contract, all goods and services
provided are considered to be ‘distinct’ as the client can
derive independent benefit from each service provision
and the promise to transfer services to the customer is
separately identifiable. These contracts contain multiple
performance obligations.
Determining transaction prices:
Transaction prices are agreed in advance of the
commencement of the work and are outlined within the
signed contract. The amount agreed per service is deemed
to be the fair value of the service provision. Consideration
receivable is usually at a fixed price, however there are
some elements that are variable and dependent on order
volume and sales levels, for example operations revenues
made up of fulfilment fees and revenue share income. The
charging structure for such transactions is clearly detailed
within the signed contract.
Allocation of transaction price to performance obligations:
Where contracts cover multiple performance obligations,
the transaction price is allocated on a basis that is
consistent with the sale of each performance obligation
in isolation.
Revenue recognition:
Within certain Ingenuity contracts, the amount of revenue
recognised depends on whether the Group are acting as
an agent or principal. The Group acts as principal when it
has control of the specified good or service prior to transfer
to the customer. Where the Group acts as principal, the
revenue recorded is the gross amount billed. Where the
Group is an agent, predominantly relating to revenue share
arrangements, revenue from the customer and costs with
suppliers are reported on a net basis representing the net
margin earned. Whether the Group is acting as principal
or agent depends on management’s analysis of both legal
form and substance of the agreement between the Group
and its business partners.
The allocated transaction price is recognised from the point
at which the customer starts to benefit from the service
and over the time the service is provided. For marketing
services, stock management, fulfilment, customer support
services and access to THG’s Ingenuity platform these are
recognised when the service is provided.
The creation of digital assets revenue is recognised
on a percentage completion basis as the work is performed
because the work does not create an asset with an
alternative use and the Group has a right to payment
for the work performed at each point in time.
d. Adjusted items
The business is managed and measured on a day-to-day
basis using underlying results (Adjusted EBITDA). This is
an important metric utilised within the business to monitor
performance and guide strategic business decisions. The
metric captures the Group’s view of underlying trading
performance after excluding non-recurring items and
initial investment / set-up costs related to establishing the
Group’s warehousing and logistics facilities. Further details
of the categories considered as adjusting items are detailed
in note 4.
Management applies judgement in determining which
items should be excluded from adjusted EBITDA. The
considerations factored into this judgement include but are
not limited to:
•
•
Nature of the item
Significance of the item on the financial results
• Management's expectation on the recurring or
non-recurring nature of the item
These are items which are material in nature and include,
but are not limited to, costs relating to acquisitions,
disposals and significant events or projects, some of which
span multiple years.
Although categories of adjusted items may appear across
multiple periods, the underlying event driving that cost or
income is often non-recurring.
These items are excluded from adjusted EBITDA as
management believe their inclusion distorts the underlying
trading performance. This is consistent with the way that
financial performance is measured by management and
reported to the Board. For further details, refer to note 4.
e. Share-based payments
The Group operates share-based compensation plans,
under which the Group receives services from employees
as consideration for equity instruments (options) of the
Company. The fair value of the employee services received
in exchange for the grant of the equity instruments
is recognised as an expense in the statement of
comprehensive income. The total expense is recognised
over the vesting period, which is the period over which
all the specified vesting conditions are to be satisfied.
At the end of each reporting period, the Group revises
its estimates of the number of equity instruments that
are expected to vest based on the non-market vesting
conditions along with taking account of any equity
instruments that may have been cancelled or modified
in the period. It recognises the impact of the revision to
original estimates, if any, in the statement of comprehensive
income with a corresponding adjustment to equity.
The shares issued under the Group's share schemes
are held by an Employee Benefit Trust ("EBT"), with the
beneficial interest in the shares being held jointly by the
EBT and the individual participant until the shares vest.
The EBT has been consolidated within the Group's
financial statements.
f. Intangible assets
Goodwill
Goodwill represents the excess of the cost of acquisitions
over the Group’s interest in the fair value of the identifiable
assets and liabilities (including intangible assets) of the
acquired entity at the date of acquisition. Goodwill is
recognised as an asset and assessed for any indications of
impairment at least annually. Any impairment is recognised
immediately in the statement of comprehensive income.
For the purposes of impairment testing, goodwill is
reviewed by assessing the cash-generating unit that has
benefited from the acquisition. If the recoverable amount of
the cash-generating unit is less than its carrying amount,
then the impairment loss is allocated first to reduce the
carrying amount of the goodwill allocated to the unit and
then to the other assets of the unit on a pro rata basis.
On disposal of a subsidiary, the attributable amount of
goodwill is included in the determination of the profit and
loss on disposal.
Platform Development costs
The costs of acquiring and developing the platform and
websites is capitalised separately as an intangible asset.
Capitalised website costs include direct costs of materials,
services, directly attributable overheads, payroll and payroll-
related costs for employees who are directly associated
with website development projects. Such costs are only
capitalised when the criteria within IAS 38 are met.
Intellectual Property
This includes separately acquired customer lists, domain
and trade names, and other intellectual property, including
customer lists acquired as part of business combinations.
Separately acquired intangible assets are measured at
cost on initial recognition. Following initial recognition,
intangible assets are carried at cost less any accumulated
amortisation and impairment losses.
Brands
Brands arising from business combinations are recognised
at fair value on acquisition date. An assessment is made
on the useful economic life, and the intangible asset is
subsequently amortised over that life. The useful economic
life is reviewed on an annual basis to confirm that the useful
life continues to be supportable.
177
178
Annual Report 2022
Other intangible assets
Costs associated with developing new products are
capitalised as an intangible asset, including directly
associated costs.
Plant and machinery
Fixtures and fittings
5-10 years
3-20 years
Intangible assets are amortised on a straight-line basis
over their estimated useful economic life. Amortisation
is charged to the statement of comprehensive income,
classified in expenses depending on the nature of the asset.
The estimates of useful economic lives are reviewed on an
annual basis and any changes are treated as changes in
accounting estimates.
Where computer software is not an integral part of a related
item of computer hardware, the software is treated as an
intangible asset. Computer software is capitalised on the
basis of the costs incurred to acquire and bring to use the
specific software. Amortisation is provided on the cost of
software and is calculated on a straight-line basis over the
useful life of the software.
The following useful economic lives are applied:
Computer equipment and software
1-10 years
Freehold buildings
Motor vehicles
Leasehold improvements
20-50 years
3-7 years
Lower of lease
term or asset life
h. Borrowing costs
Borrowing costs incurred in relation to bringing into use
both tangible and intangible assets are capitalised as the
expenditure is incurred on such assets and subsequently
depreciated in line with the useful economic life of the
relevant asset.
Platform development costs
5 years
i. Inventories
New product development
Brands
Intellectual property
(including customer lists, domain and trade names)
1-5 years
5-20 years
2-20 years
Inventories are valued at the lower of cost and net
realisable value, on a weighted average cost basis. Cost of
purchase comprises the purchase price including import
duties and other taxes, transport and handling costs and
any other directly attributable costs, less trade discounts.
A provision is made to write down any slow-moving or
obsolete inventory to net realisable value.
g. Property, plant and equipment
Property, plant and equipment are stated at historic
purchase cost less accumulated depreciation. Cost includes
the original purchase price of the asset and the costs
attributable to bringing the asset to its working condition for
its intended use. Depreciation is provided at the following
annual rates in order to write off each asset on a systematic
basis over its estimated useful economic life. Depreciation
is charged to the statement of comprehensive income,
classified in expenses depending on the nature of the asset.
At each reporting date, property, plant and equipment
is reviewed for impairment if events or changes in
circumstances indicate that the carrying amount may not
be recoverable. When a review for impairment is conducted,
the recoverable amount is assessed by reference to the net
present value of expected future pre-tax cash flows of the
relevant cash-generating unit or fair value less costs to sell
if higher. Any impairment in value is charged to profit or loss
in the period in which it occurs.
j. Financial instruments
The following are deemed to be financial assets and
liabilities within the scope of IFRS 9.
Derivative financial instruments
The Group uses derivative financial instruments, such
as foreign currency swaps, to hedge its foreign currency
risks. The Group also values options either from a third
party to acquire shares within the Group or divisions, or
where the Group holds an option to acquire shares in a
third party. Derivative financial instruments are recognised
initially and subsequently at fair value. The gain or loss on
remeasurement to fair value is recognised immediately in
the statement of comprehensive income. However, where
derivatives qualify for hedge accounting, recognition of any
resultant gain or loss depends on the nature of the item
being hedged. The sale and purchase of derivative financial
instruments are non-speculative.
Cash flow hedges
Where a derivative financial instrument is designated as a
hedge against the variability in cash flows of a recognised
asset or liability, or a highly probable forecast transaction,
any gain or loss on the effective part of the derivative
financial instrument is recognised in other comprehensive
income and accumulated within the hedging reserve.
The gain or loss on any ineffective portion of the hedge is
recognised immediately in the statement of comprehensive
income. Hedge accounting is discontinued when the
hedging instrument no longer meets the criteria for hedge
accounting, expires, or is sold, terminated or exercised.
The cumulative gain or loss previously recognised in the
hedging reserve remains there until the forecast transaction
occurs. The cumulative gain or loss in the hedging reserve
is transferred to the statement of comprehensive income in
the same period that the hedged item affects profit or loss.
Gain or loss on a portion of a derivative designated as a
hedging instrument that is excluded from that hedging
relationship is captured in the cost of hedging reserve.
Trade and other receivables
Trade and other receivables are non-interest bearing and
are initially recognised at fair value. Subsequently they are
measured at amortised cost using the effective interest rate
method less loss allowance. The Group measures the loss
allowance at an amount equal to lifetime expected credit
losses.
Cash and cash equivalents
The Group has a supply chain financing agreement in place
to support the cash flow of its external suppliers. The funding
is provided by two of the Group’s relationship banks and
gives certain suppliers the flexibility to receive early payments
on specific invoices. All early payments are processed by
the funding bank and the Group settles the original invoice
amount with the funders at the original invoice due date. The
outstanding balances due to suppliers are recorded within
trade payables.
Bank borrowings
Interest-bearing bank loans and overdrafts are initially
recorded at fair value, which equals the proceeds received,
net of direct issue costs. Finance charges, including
premiums payable on settlement or redemption and direct
issue costs, are accounted for using an effective interest
rate method and are added to the carrying amount of the
instrument to the extent that they are not settled in the
period in which they arise.
k. Supplier income
Supplier income comprises retrospective rebates and
discounts. They are receivable in respect of goods which
have been sold and are initially recognised as accrued
income. The retrospective rebates are analysed per supplier
basis and accrued income is adjusted accordingly based
on quarterly assessment of variables impacting expected
rebates. All retrospective rebates and discounts received
and receivable are deducted from cost of sales when the
sale to the third party has been completed.
Cash and cash equivalents comprise cash at bank and in
hand and short-term deposits with an original maturity of
three months or less. Cash and cash equivalents include
amounts receivable from banks and payment providers
for credit and debit card transactions which clear the bank
shortly after the transaction takes place.
For the purposes of the consolidated statement of cash
flows, cash and cash equivalents consist of cash and
short-term deposits, as defined, net of outstanding bank
overdrafts.
l. Contract liabilities
A contract liability is the obligation to transfer goods or
services to a customer for which the Group has received
consideration (or an amount of consideration is due) from
the customer. If a customer pays consideration before
the Group transfers goods or services to the customer, a
contract liability is recognised when the payment is made
or the payment is due (whichever is earlier). Contract
liabilities are recognised as revenue when the Group
performs under the contract.
Financial liabilities
m. Leases
Financial liabilities within the scope of IFRS 9 are classified
as financial liabilities at amortised cost. The Group
measures contingent consideration liabilities at fair value
through profit and loss.
The Group assesses at contract inception whether a
contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identified asset for
a period of time in exchange for consideration.
Trade and other payables
Group as a lessee
Trade and other payables are non-interest bearing and are
recognised initially at fair value and subsequently measured
at amortised cost using the effective interest method. Within
trade and other payables, returns recognised under IFRS 15
(representing the liability for potential returns from customers)
are captured within accruals.
The Group applies a single recognition and measurement
approach for all leases, except for short-term leases and
leases of low-value assets. The Group recognises lease
liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.
179
180
Annual Report 2022 Right-of-use assets
The Group recognises right-of-use assets at the
commencement date of the lease (i.e. the date the
underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised,
initial direct costs incurred and lease payments made at or
before the commencement date, less any lease incentives
received. Right-of-use assets are depreciated on a straight-
line basis over the shorter of the lease term and the
estimated useful lives of the assets, as follows:
Plant and machinery
Motor vehicles
Buildings
Lease liabilities
1– 6 years
3–6 years
1–28 years
At the commencement date of the lease, the Group
recognises lease liabilities measured at the present value of
lease payments to be made over the lease term. The lease
payments include fixed payments (including in-substance
fixed payments) less any lease incentives receivable,
variable lease payments that depend on an index or a
rate and amounts expected to be paid under residual
value guarantees. The lease payments also include the
exercise price of a purchase option reasonably certain to
be exercised by the Group and payments of penalties for
terminating the lease, if the lease term reflects the Group
exercising the option to terminate.
In calculating the present value of lease payments,
the Group uses its incremental borrowing rate at the
lease commencement date because the interest rate
implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced for
the lease payments made. In addition, the carrying amount
of lease liabilities is remeasured if there is a modification, a
change in the lease term, a change in the lease payments
(e.g. changes to future payments resulting from a change
in an index or rate used to determine such lease payments)
or a change in the assessment of an option to purchase the
underlying asset.
The Group’s lease liabilities are included in interest-bearing
loans and borrowings.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition
exemption to its short-term leases (i.e. those leases
that have a lease term of 12 months or less from the
commencement date and do not contain a purchase
option). It also applies the lease of low-value assets
recognition exemption to leases that are considered to be
low value. Lease payments on short-term leases and leases
of low-value assets are recognised as an expense on a
straight-line basis over the lease term.
Group as a lessor
Leases in which the Group does not transfer substantially
all the risks and rewards incidental to ownership of an asset
are classified as operating leases. Rental income arising is
accounted for on a straight-line basis over the lease terms
and is included in revenue in the statement of profit or loss
due to its operating nature. Initial direct costs incurred in
negotiating and arranging an operating lease are added
to the carrying amount of the leased asset and recognised
over the lease term on the same basis as rental income.
Contingent rents are recognised as revenue in the period in
which they are earned.
Sale and Leaseback accounting
The Group applies sale and leaseback accounting in
accordance with IFRS 16 ‘Leases’. Specifically, the Group
recognises the gain or loss on the sale and leaseback
transaction by recognising the proportion relating to rights
transferred to the buyer directly to the income statement.
Dilapidations provisions
Dilapidations provisions relate to leased properties.
Dilapidations provisions are made based on the best
estimate of the likely committed cash outflow and
discounted to net present value. The provision, when
recognised increases the right-of-use asset. Dilapidations
provisions are expected to be used at or by the end of the
lease term.
n. Taxation
The tax expense included in the statement of
comprehensive income and statement of changes in equity
comprises current and deferred tax.
Current tax is the expected tax payable based on the
taxable profit for the period and the tax laws that have
been enacted or substantively enacted by the reporting
date. Management periodically evaluates positions taken
in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation. It establishes
provisions where appropriate, based on amounts expected
to be paid to the tax authorities. Current and deferred tax
is charged or credited in the statement of comprehensive
income, except when it relates to items charged or credited
directly to equity, in which case the current or deferred tax
is also recognised directly in equity.
Deferred tax is recognised on differences between the
carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the
computation of taxable profit and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that
it is probable that taxable profits will be available against
which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the
temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the
tax profit nor the accounting profit. The carrying amount
of deferred tax assets is reviewed at each reporting date.
The business combinations in previous years have given
rise to deferred tax liabilities, as a result deferred tax assets
are recognised to the extent they offset the corresponding
liability. Deferred tax is calculated at the tax rates (and laws)
that are expected to apply in the period when the liability is
settled, or the asset is realised.
Tax assets and liabilities are offset where there is a legally
enforceable right to offset current tax assets against current
tax liabilities and when the deferred tax assets and liabilities
relate to income taxes levied by the same taxation authority
on either the taxable entity or different taxable entities
and where there is an intention to settle the balances on a
net basis.
o. Foreign currency translation
Functional and presentational currency
Items included in the financial statements of each of the
Group’s entities are measured using the currency of the
primary economic environment in which the entity operates
(“the functional currency”). The consolidated financial
statements are presented in Sterling which is also the
parent company’s functional currency.
Transactions and balances
Transactions denominated in foreign currencies are
translated into the functional currency at the exchange rates
prevailing on the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the
exchange date. Exchange differences on monetary items
are taken to the statement of comprehensive income.
Group companies
On consolidation, the assets and liabilities of foreign
operations are translated into the presentational currency
of the Group at the rate of exchange prevailing at the
reporting date and their statements of comprehensive
income are translated at exchange rates prevailing at the
dates of the transactions. The exchange differences arising
on translation for consolidation are recognised in other
comprehensive income.
On disposal of a foreign operation, the component of
OCI relating to that foreign operation is recognised in the
statement of comprehensive income.
p. Government grants
Government grants are recognised where there is
reasonable assurance that the grant will be received and all
attached conditions will be complied with. When the grant
relates to an expense item, it is recognised as income on a
systematic basis over the periods that the related costs, for
which it is intended to compensate are expensed. When the
grant relates to an asset, it is recognised as income in equal
amounts over the expected useful life of the related asset.
q. Earnings per share
Basic earnings per share (EPS) is calculated by dividing
the profit or loss for the year attributable to ordinary equity
holders of the parent by the weighted average number of
ordinary shares outstanding during the year.
Diluted EPS is calculated by dividing the profit or loss
attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding
during the year plus the weighted average number of
ordinary shares that would be issued on conversion of all the
dilutive potential ordinary shares into ordinary shares, to the
extent that the inclusion of such shares is not anti-dilutive.
r. Critical accounting judgements and
key sources of estimation uncertainty
In the application of the Group’s accounting policies,
management is required to make judgements (other than
those involving estimations) that have a significant impact
on the amounts recognised and to make estimates and
assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on
historical experience and other factors that are relevant.
Actual results may differ from these estimates. The estimates
and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision
affects only that period, or in the period of the revision and
future periods if the revision affects both current and future
periods. The most critical accounting judgements or key
sources of estimation uncertainty are detailed as follows:
Critical accounting judgements
Capitalisation and amortisation of platform
development costs
Costs capitalised as platform development costs include
direct external costs such as consultancy costs and internal
payroll costs. The capitalisation of internal costs is based on
the amount of time spent by employees on capital projects.
Judgement is applied in determining which costs meet the IAS
38 criteria for capitalisation as development costs, dependent
on the type of cost and the project, along with the appropriate
element of employee time capitalised. The key judgement
relates to assessing the feasibility and the extent of future
181
182
Annual Report 2022 economic benefits that will be derived from each project.
Refer to note 11 for details of capitalised platform
development costs. The useful economic life of the platform
is between one and five years, dependent on the type
of development work capitalised. The estimate of useful
economic life is reviewed on a regular basis to ensure that
this continues to be appropriate.
Adjusted items
The identification of adjusted items depends on management
judgement in identifying and quantifying amounts
deemed to be adjusting or not reflective of the underlying
performance of the Group. The key elements management
take into consideration include, but are not limited to:
The underlying nature of the item;
•
• Whether management believe the item is recurring
in nature, or if it represents a one-off distortion of the
underlying results of the business; and
Significance of the item on the financial results.
•
Refer to note 4 for details of each class of adjusted items.
Impairment reviews – number of cash-generating units
The Group is required to review intangible assets, including
goodwill, with indefinite lives annually to determine if any
impairment has occurred. Intangible assets with finite lives are
reviewed for impairment if events or changes in circumstances
indicate that the carrying amount may not be recoverable. The
identification of cash generating units (“CGUs”) is a judgement
exercised by management, who consider the interoperability
of the Group’s asset base, along with the ability to identify
separable series of cash flows attached to those assets.
There has been a change in the number of CGUs in the year
following the divisional reorganisation of the Group. More
information has been provided within note 11.
Key sources of estimation uncertainty
Goodwill and intangible asset valuation
The Group has made several acquisitions in previous years,
and in doing so recognised a number of intangible assets
on consolidation, including Brands, Customer Lists, and
Goodwill (refer to note 11).
In valuing these intangibles assets, management were
required to use judgement to estimate their fair value.
Intangible assets identified on acquisition are brand names,
customer lists and intellectual property. The material
assumptions used include cash flow forecasts of the entity
(including growth rates and royalty rates), customer retention
rates and the contributory asset charges. To assist in this work,
the Group engages external valuation experts for a number
of acquisitions to assess the fair values of intangible assets.
Management review the work carried out by these external
valuation experts and assess the outcome. The fair values
of the acquired entities’ balance sheets are also assessed
to ensure that the values reflect the fair value of all acquired
assets and liabilities.
183
Inventory provisioning
The Group holds levels of stock sufficient to meet the
forecasted demand of its customers. As part of this, a
provision is recognised to ensure that the balance sheet
value of stock held is at the lower of cost and net realisable
value in accordance with IAS 2. As part of the provisioning
process, management's consideration includes, but is not
limited to: age of stock, type of stock, and inventory acquired
through business combinations. Refer to note 13 for further
details on inventory. A reduction of 10% in online sales selling
prices would impact the net realisable value by c£0.7m.
Impairment reviews – key estimates and judgements
When a review for impairment is conducted, the recoverable
amount of the CGU is determined based on the higher of value-
in-use calculations applying IAS 36 and fair value less costs to
dispose applying IFRS 13. The recoverable amount is calculated
using management’s assumptions and estimates. The key
estimates within the value-in-use calculation are growth rates
and discount rates applied. The key estimates within the fair
value less costs to dispose are the length of forecast period
applied, discount rates including any risk premium and growth
rates. Refer to note 11 for further details of calculations.
Other judgements and other sources
of estimation uncertainty
Climate Change
In preparing the consolidated financial statements
management has taken into consideration the impact of
climate change. Considerations include, but are not limited to:
•
•
•
The identification of costs which have been
committed to which have been included within
forecasts where appropriate, the key impact to THG
is the implementation of plastic packaging tax and
Packaging Waste Regulations;
The impact of climate change on a number of key
estimates which the Group has included within
forecasts where appropriate;
The impact of the Group’s investments in sustainable
businesses, evidenced in the prior year acquisition
of companies such as More Trees, Preston Plastics
and Indigo Environmental (note 10) to aid the Group’s
movement towards its sustainability targets.
These considerations have not identified any significant
impacts from our climate commitments and therefore do
not have a material impact on the financial statements or
reporting judgements and estimates.
Revenue recognition – Principal vs Agent
Within certain Ingenuity contracts, the amount of revenue
recognised depends on whether the Group are acting as an
agent or principal. The Group acts as principal when it has
control of the specified good or service prior to transfer to the
customer. Where the Group acts as principal, the revenue
recorded is the gross amount billed. Where the Group is an
agent, predominantly relating to revenue share arrangements,
revenue from the customer and costs with suppliers are
reported on a net basis representing the net margin earned.
Whether the Group is acting as principal or agent depends on
management’s analysis of both legal form and substance of
the agreement between the Group and its business partners.
2. Segmental reporting and revenue
Following the completion of the divisional reorganisation, the Directors have re-assessed the criteria and considerations
under IFRS 8 ‘Operating Segments’ in order to identify operating segments within the Group. For 31 December 2022,
the Directors have concluded that the Group has six operating segments. Until 31 December 2021, the Group only had
one operating segment. During 2022, the Group’s activities were divided into the following segments THG Beauty, THG
Nutrition, THG Ingenuity, THG OnDemand (disclosed under the discontinued categories segment), THG Luxury and THG
Experience. This corresponds to the internal reporting and organisational structure that changed during the year. The THG
Luxury and THG Experience segments are aggregated due to being below the quantitative thresholds as set out in IFRS 8.
Central costs are disclosed separately.
The prior year segmental analysis for EBITDA has been presented as this measure has been reported to the Chief
Operating Decision Maker (CODM) during the current year as a comparative measure following the restructure. The prior
year segmental revenue includes an illustrative internal recharge from THG Ingenuity to the wider THG PLC Group as if this
was in place throughout 2021 to provide a like-for-like comparison.
The results of each division are reported to the Board of Directors and are treated as reportable operating segments.
The following table describes the main activities for each reportable operating segment:
Segment
Activities
THG Beauty
The digital-first brand owner, retailer and manufacturer in the prestige beauty market, combining its
prestige portfolio of eight owned brands across skincare, haircare and cosmetics, the provision of
a global route to market for over 1,300 third-party beauty brands through its portfolio of websites,
including Lookfantastic, Dermstore, Cult Beauty and Mankind and the beauty subscription box brand
GLOSSYBOX.
THG Nutrition
A group of digital-first Nutrition brands, which includes the world’s largest online sports nutrition brand
Myprotein, and its family brands (Myvegan, Myvitamins, MP Activewear and MyPRO), with a vertical-
ly-integrated business model, supported by global THG production facilities.
THG Ingenuity
THG Ingenuity provides a complete digital commerce solution for consumer brand owners across its
three pillars of technology, digital and operations. Being part of the THG group, a global digital brand
owner in Beauty & Nutrition, Ingenuity is uniquely placed to bring relevant, practical, and international
expertise in every area of commerce.
Other
Includes THG Luxury and THG Experience. THG Luxury operates D2C websites retailing luxury clothing
and homeware. THG Experience comprises prestige events locations at Hale Country Club & Spa, King
Street Townhouse Hotel and Great John Street Hotel.
Discontinued
categories
At the year end, certain loss-making categories and territories primarily within THG OnDemand were
placed under strategic review. This review is now complete and these operations will be fully exited in
2023. The exit doesn’t meet the criteria under IFRS 5: Discontinued operations at the balance sheet
date, as these categories and territories are not a major component of the Group as defined by the
accounting standard, however, management began to report the financial results of these categories
separately in their reporting to the CODM, as such the result has also been shown in the same format
within this note.
Central costs relate primarily to the PLC Board remuneration, professional services fees, group finance, M&A, risk
(insurance) and governance costs that are not recharged to the divisions as they principally relate to the operations of the
PLC holding company.
The CODM is the executive Board directors, who makes the key operating decisions for the business. The CODM receives
daily financial information at the combined Group level, along with monthly information at a divisional level and uses this
information to allocate resources, make operating decisions and monitor the performance of each of the divisions.
184
Annual Report 2022 -
2,120,568
118,661
2,239,229
Internal revenue
-
-
602,545
-
597,420
-
-
-
Total revenue
1,181,529
659,531
748,851
46,062
(597,420)
2,120,568
118,661
2,239,229
Adjusted EBITDA
70,234
76,633
40,410
(2,137)
(15,517)
The measure of the Group’s profit or loss used by THG’s management team are both Adjusted EBITDA pre SaaS change
in accounting policy and Adjusted EBITDA comprising operating loss less interest, tax, depreciation, amortisation, shared-
based payments and adjusted items. This is reconciled to the nearest IFRS measure (loss before tax) in the below table.
THG
Beauty
THG
Nutrition
THG
Ingenuity
Other
Central
PLC
Inter-group
elimination
2022
£’000
£’000
£’000
£’000
£’000
£’000
Result before
discontinued
categories 1
£’000
Discontinued
categories
2022
Total
£’000
£’000
External revenue
1,234,977
675,133
159,580
50,878
Internal revenue
-
-
597,420
-
Total revenue
1,234,977
675,133
757,000
50,878
-
-
-
Adjusted EBITDA
pre SaaS costs
32,866
51,783
29,304
(1,907)
(23,167)
Adjusted EBITDA
32,866
51,783
19,121
(1,907)
(23,167)
Margin %
2.7%
7.7%
2.5%
-3.7%
Depreciation
Amortisation
Share-based
payments
Adjusted items
Operating loss
Finance income
Finance costs
Loss before taxation
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
88,879
(14,582)
74,297
78,696
(14,582)
64,114
3.7%
-12.3%
2.9%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(94,191)
(108,975)
(10,734)
(345,779)
(495,565)
2,359
(56,522)
(549,728)
1. At the year end, certain loss-making categories and territories within non-core divisions were placed under strategic review and subsequently management
has decided to exit these areas. The exit doesn’t meet the criteria under IFRS 5: Discontinued operations as these categories and territories are not a major
component of the Group as defined by the accounting standard, however, to provide further information on the ongoing revenue and Adjusted EBITDA of
the Group the result of these operations have been shown separately in the above table.
An element of Ingenuity revenue is contract based and therefore is recognised over time; all other revenue streams are recognised
at a point in time. Of the total revenues recognised for THG Ingenuity, £73.8m (2021: £75.6m) is recognised over time.
Segment assets and liabilities are not disclosed because they are not yet regularly reported or reviewed by the Board.
In 2021, the Group only had one operating segment. The below information has been included as the comparative disclosure.
THG
Beauty
THG
Nutrition
THG
Ingenuity
Other
Central
PLC
Inter-group
elimination3
2021
£’000
£’000
£’000
£’000
£’000
£’000
Result before
discontinued
categories 2
£’000
Discontinued
categories
2021
Total4
£’000
£’000
External revenue
1,181,529
659,531
146,306
46,062
-
-
-
-
2,033,428
146,482
2,179,910
602,545
-
-
-
(602,545)
2,033,428
146,482
2,179,910
Margin %
5.9%
11.6%
5.4%
-4.6%
Depreciation
Amortisation
Adjusted items
Operating loss
Finance income
Finance costs
Loss before taxation
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
169,263
(8,348)
161,276
8.3%
-5.7%
7.4%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(70,478)
(99,033)
(129,228)
(137,463)
623
(49,447)
(186,287)
2. For the loss-making categories and territories within non-core divisions that have been shown separately within the 2022 table under the discontinued
categories heading, the same adjustment has been included for 2021 result to show a comparative of continuing operations year-on-year.
3. Internal revenue was not recharged until the completion of the divisional reorganisation, however for illustrative purposes this has been calculated for 2021.
This has been calculated using the same charging mechanisms in 2022 to provide a like-for-like comparison.
4. Following the completion of the divisional reorganisation, the strategy of each segment has been reviewed and redefined where necessary, as a result
some services were redefined within THG Ingenuity, THG Beauty and Other segments in 2022. To ensure that the comparative disclosure is consistent this
has been restated in the above table. The impact is an increase in THG Beauty external revenue of £63.7m, decrease in THG Ingenuity external revenue of
£48.0m and decrease of Other segments external revenue of £15.7m. THG Beauty has been restated to include Acheson & Acheson which was previously
recognised within THG Ingenuity due to some services being delivered to THG Ingenuity customers which is no longer the case. THG Ingenuity has been
restated to exclude Acheson & Acheson manufacturing and include Arrow Films which has been reclassified following the discontinuation of the other
categories within THG OnDemand. The total revenue has not changed as a result of the inter-segment reclassifications.
185
186
Annual Report 2022
The Group has provided an analysis of external revenue by region (by destination):
4. Adjusted items
UK
USA
Europe
Rest of the world
The Group’s non-current assets by geography are as follows:
UK
Europe
Rest of the world
2022
£'000
960,535
446,542
449,783
382,369
2021
£'000
909,452
406,489
458,027
405,942
2,239,229
2,179,910
2022
£'000
2021
£'000
1,257,689
1,891,133
145,057
550,333
37,966
224,495
1,953,079
2,153,594
Following the completion of the divisional reorganisation in the year, certain intangible assets have been reclassified
between geographies, given the greater granularity of information available.
3. Operating loss
Operating loss has been arrived at after charging / (crediting):
Adjusted items - impairment
Adjusted items - other
Employee costs
Share-based payments
Depreciation on fixed assets
Depreciation on right-of-use assets
Amortisation of intangibles
Government grants
Net foreign exchange gain
Note
4
4
7
12
22
11
2022
£'000
275,422
70,357
275,145
10,734
50,896
43,295
108,975
(1,752)
1,422
2021
£'000
55,990
73,238
260,892
-
38,269
32,209
99,033
(1,662)
444
These are items which are material in nature and include, but are not limited to, costs relating to acquisitions, disposals and
significant events or programmes, some of which span multiple years. These items are excluded from adjusted EBITDA
as management believe their inclusion distorts the underlying trading performance. This is consistent with the way that
financial performance is measured by management and reported to the Board.
Within Cost of sales
Inventory provision for discontinuation of loss-making categories
and decommissioning of facilities following strategic review
Within distribution costs
Transportation, delivery and fulfilment costs in relation to Covid-19
Commissioning – new facilities
Within Administrative costs
Other costs following the outcome of strategic review
Restructuring costs to simplify the Group structure
Impairment of assets within Experience, Luxury and OnDemand divisions
Impairment of certain intangible and tangible assets associated with
Software-as-a-service arrangements
Impairment of assets
Impairment of assets within the discontinued categories
Impairment of non-core assets held for sale
Donations
Acquisitions - restructuring and integration
Acquisitions - legal and professional costs
Other legal and professional costs
2022
£'000
25,517
25,517
18,504
3,613
22,117
6,942
6,803
-
-
269,828
3,763
1,831
362
8,046
-
570
298,145
2021
£'000
-
-
26,628
16,384
43,012
-
10,233
53,008
2,982
-
-
-
1,090
5,328
12,225
1,350
86,216
Total adjusted items before finance costs
345,779
129,228
Within finance costs
Non-cash – revaluation of SBM option
Total adjusted Items before tax
Tax impact
Total adjusted items
(601)
601
345,178
129,829
(11,634)
333,544
(11,901)
117,928
187
188
Annual Report 2022 Inventory provision for discontinuation of loss-making categories and decommission of facilities
following strategic review
Following the divisional reorganisation, the Group has undertaken a strategic review of loss-making categories and
territories within THG OnDemand and other non-core divisions. In addition, as part of the strategic review in the year,
the Group also reviewed its warehousing facilities resulting in some sites being decommissioned. The result of the
decommissioning identified inventory where there was no economic benefit of the Group to moving to an alternative
warehouse or selling via other channels. The outcome of these reviews has led to a one off inventory provision for the
categories being discontinued of £25.5m which has been recognised within cost of sales.
Transportation, delivery and fulfilment costs in relation to Covid-19
In 2022, we continue to be impacted by Covid-19 surcharges from suppliers with routes travelling through and into Asia,
although at a lesser rate during 2022 compared to prior periods. Covid-19 has had a direct and measurable impact on
the Group’s cost to fulfil delivery of goods to customers across its global network, through reduced commercial flights
and closures of key shipping lanes. The main driving factor of the excess cost continuing across accounting periods is
the continued lockdowns experienced in Asia which continue to affect air traffic. The additional cost to complete these
deliveries has been recognised as an adjusted item, and while there is uncertainty around the length of disruption the
pandemic will have on global supply chains, the Group doesn’t consider this to be a recurring part of the Group’s cost base.
As the effects of the pandemic lessen and the lockdowns in Asia ease, the service providers will no longer need to charge
such excess costs. We anticipate the costs to reduce significantly in 2023.
The costs incurred were as a result of the following:
•
•
•
In order to maintain the Group’s pre Covid-19 levels of customer experience, the Group had to address the challenges
caused by commercial flights being reduced during the pandemic to minimal levels. The Group secured THG
exclusive chartered flights in order to be able to uphold its service levels, generating an identifiable increase in costs
versus non-exclusive passenger flights, which were used pre Covid-19. As the impact of the pandemic have lessened
the requirement to charter flights has dropped away in the first half of 2022 and this cost will not continue.
Our delivery partners passed on to the Group additional surcharges specifically identified on invoices as a response
to operating during the pandemic. This continues for routes relating to Asia where the impact of the pandemic is
continuing and this cost has continued to decrease each month during 2022 and post year end.
Due to the impact of Covid-19, a number of key supply routes were disrupted or closed. This necessitated identifying
and sourcing alternative viable routes to fulfil the obligations on the Group to serve its customers, which created
identifiable external costs relating to alternative routes that had to be taken due to the impact of Covid-19 on the
Group’s courier and logistics providers ability to operate in the pandemic. This cost will not continue.
Commissioning – new facilities
The Group has embarked on a strategic project to transform the Group’s global infrastructure footprint and capability,
moving away from the smaller sized facilities which were fit for purpose in the past, into larger purpose-built distribution
facilities to support the strategic objectives of the Group.
Under this project, the Group has commissioned a number of these purpose-built facilities over the years, including a
campus (inclusive of 3 warehouses) at Manchester Airport, UK (“Icon”) and New Jersey, US. Works at New Jersey, US and
the Icon facility began in August 2021 and August 2020 respectively. These warehouses are in operation, although further
automation is required to be implemented into the sites to reach to optimal efficiency expected of the sites, including
Autostore automation in New Jersey in 2023 and automated sortation in Icon in 2022. The costs have significantly reduced
year on year as these projects reach completion stages. The majority of the costs incurred in the prior year relate to the
commissioning of the multiple ICON warehouses, of which two out of three completed during 2022.
Due to the scale and complexity of these sites, commissioning of these facilities and integration into the Group’s existing
distribution network can span more than one accounting period, taking on average 18 months for a specific site; a relatively
short period compared to the useful economic life of the asset. During the commissioning and integration period, costs
relating to the set-up, integration and testing of the new facilities are included within adjusted items as these costs are not
expected to be recurring for each specific site and do not reflect the underlying cost base of the Group. Such costs include:
Additional costs incurred relating to the period of testing and commissioning that is required, to ensure a facility is
operating as expected. Such costs are non-underlying and therefore included within adjusted items;
Costs relating to the migration of production operations and processes to the new sites as part of this expansion of
the fulfilment network include testing of new production processes and resolution of any commissioning protocols
required before production is fully operational;
Costs relating to bulk internal warehouse transfers from existing THG facilities are often required during the set up/
commissioning period for a new facility. These costs are non-underlying in nature; and
•
•
•
189
•
Additional shipping costs are incurred when the products within a single customer order is fulfilled by shipping from
two different warehouses, due to stock being split across two sites during the commissioning period for a new facility.
This results in duplicated postage costs on a single order.
The costs above are identified through internal processes and controls which isolate the impact of commissioning new
facilities. For some of these costs, the amounts included within adjusted items are calculated by taking the excess costs per
unit versus the normalised rate, which is set based on historical information or third-party data.
Further charges are anticipated as the respective projects are completed, however the quantum of which is expected to
continue to reduce year on year as these projects are completed. The key projects ongoing into 2023 are for Icon and New
Jersey and are expected to be completed by the end of 2023 at which point these costs will not continue. The costs to date
for these two sites total £12.0m with the projects being c90% complete at 31 December 2022.
Other costs following the outcome of strategic review
Other costs following the outcome of the strategic review totalling £6.9m are included within administrative costs. These
costs include the costs triggering early lease break clauses for the unprofitable warehouse operations within Asia and
marketing costs for pre-releases that will no longer be launched. The full exit of the discontinued areas is expected to be
complete by the end of Q3 2023 with costs not recurring after this date.
Restructuring costs to simplify the Group structure
The costs included within restructuring costs of £6.8m (2021: £10.2m) include costs of executing the Group
simplification project.
Impairment
Impairment of assets within Experience, Luxury and OnDemand divisions
See impairment of assets within the discontinued categories heading for information relating to 2022.
In 2021, a one-off, non-cash impairment of £53.0m was recognised in respect of THG Experience, THG Luxury and THG
OnDemand business units.
Impairment of certain intangible and tangible assets associated with Software-as-a-Service arrangements
There was no impairment of these costs incurred in 2022. SaaS costs incurred in 2022 have been recognised within the
underlying administrative expenses.
The Group hold various arrangements for SaaS solutions. Given the IFRIC agenda decision in 2021, the Group updated
its accounting treatment and policy for IAS 38 Intangible Assets accordingly in the prior year. We determined that £3.0m
of SaaS related costs no longer met the criteria for recognition as an asset under IAS 38. Accordingly, this amount
was expensed in full and has been disclosed as an adjusting item because it arises from the one-off introduction of
interpretations to accounting guidance.
Impairment of assets
A further impact of the divisional reorganisation is that the assets and cash flows of each division are now separately
identifiable. The result being the identification of additional cash-generating-units (‘CGUs’), which are reflective of the new
corporate structure. The result of more CGUs is that the impairment review has been undertaken at a more granular level than
in previous years. Following the significant acquisitions within the THG Beauty division in recent years, a substantial amount of
intangible assets are included within the underlying asset base whilst the market price of comparable assets, alongside many
technology businesses has fallen over the last 18 months. This is reflective of more challenging global markets following the
macroeconomic, inflationary and interest rate pressures driven by, amongst other things, the Russia-Ukraine conflict. Against
this backdrop, the impairment review has led to an impairment of £183m within the Beauty division.
In addition, an impairment charge of £87m has been recognised within the THG Ingenuity cash-generating-unit. This
has arisen as the impairment review has been undertaken at a more granular level than in previous years. Following the
appointment of our new CEO of THG Ingenuity in 2022, the Group has repositioned its’ strategy. Management believe they
have made conservative growth assumptions which are lower than the growth rate prospects of the sectors in which THG
Ingenuity operates given the recent change in strategy. Alongside this, THG Ingenuity has made significant investment for
the future in its platform and global infrastructure network. These factors combined with the challenging macroeconomic
environment impacting several of the key assumptions, particularly the discount rate, which have also had a bearing on
peer valuations, has led to the impairment of the historical goodwill within this cash-generating-unit.
More information is included within note 11.
190
Annual Report 2022
Impairment of assets within the discontinued categories
Following the decision to discontinue certain categories and territories an impairment has been charged totalling £3.7m
against affected assets. More information is included within note 11.
Impairment of non-core assets held for sale
An impairment charge of £1.8m has been recognised against non-core assets that meet the criteria to be classified as held
for sale under IFRS 5. The net book value of these assets has been reclassified to a current asset and an impairment charge
has been recognised for the difference between the selling price and the carrying value.
Donations
In 2022, the Group has donated £0.4m related to aid in the form of nutrition and hygiene products to charities assisting
with the war in Ukraine. In 2021, as part of its Covid-19 response, the Group made several charitable donations to the local
region, totalling £1.1m.
5. Auditors' remuneration
Fees in respect of the audit of the Consolidated and Parent Company Financial Statements
Other audit fees, principally in respect of audits of accounts of subsidiaries
Total audit fees
Other services:
- other assurance services1
Total non-audit services
Total fees
2022
£'000
2,300
-
2,300
100
100
2021
£'000
2,150
150
2,300
100
100
2,400
2,400
Acquisitions – restructuring and integration
1. Fees in respect of other assurance services relate to interim procedures in accordance with International Standard for Review Engagements (UK and Ireland) 2410.
Where the Group completes acquisitions, it derives value by achieving synergies in the post-acquisition period by
restructuring the acquired businesses and integrating them into the Group. During this restructuring and integration phase
there are a number of costs that are not related to the underlying trading operations of the Group which are classified
as adjusted items. The costs in 2022 relate to the planned integrations of the acquisitions made in 2021. Cult Beauty was
acquired in August 2021 and the integration was a key focus of 2022.
These costs include, but are not limited to;
•
• Duplicated costs whilst the integration plan is executed. These often relate to termination of pre-acquisition
agreements that were in place and exit costs associated (such as closure of old facilities or head offices);
As part of the integration plan itself, additional non-recurring costs may be incurred which do not relate to the
underlying trading operations of the Group, including, but are not limited to, system integration testing and validation,
costs of moving equipment to new sites and department relocation or set up costs; and
Costs of staff exiting the business, including redundancy costs, earnouts or bonus payments relating to the integration
plan. Integration plans can often result in moving offices geographically, a change in management structure or
redefining the roles and needs of departments or individuals. As a result, some employee redundancy costs are
incurred. Payments are also made to employees for successful delivery of integration plans.
•
Depending on the size and nature of the acquisition and the complexity of the integration plan, acquisition restructuring
and integration costs can be incurred for up to 12 months post-acquisition.
Acquisitions – legal and professional costs
The Group periodically considers and analyses potential acquisition targets and recognises there is inherent complexity
and risk associated with acquisitions. The Group manages this by employing external professional advisors to perform legal,
financial, commercial and tax due diligence on targets. These costs relate to opportunities the Group identifies and pursues,
of which a portion result in successful acquisitions by the Group. Such legal and professional costs are classified as
adjusting items as they relate to significant strategic transactions and, except for the transactions in question, the business
would not have incurred these costs and as a result these costs are deemed to be non-recurring costs that do not relate to
the underlying trading operations of the business. There have been no such costs incurred in 2022.
Other legal and professional costs
Non-cash – revaluation of SBM option
On 10 May 2021, THG entered into a call option with SB Management Limited ("SBM"), a wholly owned subsidiary of
SoftBank Group Corp, to purchase 19.9% of the share capital of THG Ingenuity for $1.6bn. On 26 July 2022, the Group
announced that in light of global macroeconomic conditions the SBM option agreement had been terminated by mutual
agreement. The call option granted by THG to SBM will not therefore be, and will cease to be capable of being exercised.
At 31 December 2022, the option has therefore been derecognised.
The option had previously been classified as a derivative instrument, an option that held value for SBM and consequently
fell under the provisions of IFRS 9 (Financial Instruments). The impact of the derecognition is a non-cash £0.6m gain
recognised on the revaluation. As this is a non-recurring transaction the revaluation effects of this option have been
presented as an adjusted item.
191
6. Employee costs and Directors’ remuneration
Wages and salaries
Social security costs
Pension costs
Share-based payments
Note
7
2022
£'000
2021
£'000
283,080
270,063
32,091
10,407
10,734
27,615
7,606
-
336,312
305,284
The aggregate amount of employee costs included above that have been capitalised within platform development costs
was £50.5m (2021: £44.4m).
The costs incurred in respect of the Executive Directors and Non-Executive Directors, who are regarded as the key
management personnel, were as follows:
Wages and salaries
Social security costs
Pension costs
2022
£'000
1,056
124
1
1,181
2021
£'000
600
65
-
665
2022
2021
Number
Number
Retail
Administration
Distribution
Information technology
3,287
1,051
3,834
869
9,041
The above table reflects the full time equivalent (FTE) number of employees calculated as an average throughout
the year. The total staff numbers on a FTE basis at 1 January 2022 were 10,185 and at 31 December 2022 were 8,239.
3,023
1,285
3,555
744
8,607
192
The Group incurs legal and professional costs that are non-recurring, one-off in nature and not related to trading activities.
These costs are included as adjusted items and can include, but are not limited to, legal costs for one off matters and other
fees associated with investor activities.
No retirement benefits are accruing to any of the Directors at 31 December 2022 (2021: nil).
The average number of employees (including executive directors) during the year was:
Annual Report 2022 7. Share-based payments
The Group operates a share-based compensation plan, under which the Group receives services from employees as
consideration for equity settled instruments (options) of the Company. Options over Ordinary Shares were granted to
participants on 16 June 2022, with top up options awarded to certain participants on 3 October 2022. The fair value of
the employee services received in exchange for the grant of the equity instruments is recognised as an expense in the
Statement of Comprehensive Income with the corresponding increase to equity. The option awards will vest in three equal
tranches on 31 December 2022, 31 December 2023 and 31 December 2024 provided participants remain in continued
employment with the Company at each date. Performance conditions are attached to a small proportion of the awards
to a small number of participants.
9.
Income tax
Current tax
Tax charge for the year
Adjustments in respect of prior year
Deferred tax
Note
2022
£'000
2,218
(3,025)
(807)
2021
£'000
10,057
4,349
14,406
Expense arising from equity-settled share-based payment transactions
The following table shows the shares granted and outstanding at the beginning and end of the year:
Finance income
As at 1 January
Granted during the year
Vested during the year
Forfeited during the year
As at 31 December
2022
£'000
10,734
2021
£'000
-
2022
Number of shares
-
43,352,699
(12,547,412)
(1,556,687)
29,248,600
The key inputs to calculate the charge are the share price at the date of grant and an assumption around those not
remaining in continued employment, spread across the vesting period. Achievement of performance conditions have
been considered where appropriate. The range of exercise prices are £0.00 to £0.11, and the weighted average remaining
contractual life is 9.6 years.
8. Finance income and cost
Finance income
Bank interest receivable
Derivative financial instrument
Finance costs
Bank interest payable and charges
Interest on lease liabilities
Revaluation of SBM option
2022
£'000
2,359
-
2,359
42,791
14,332
(601)
56,522
2021
£'000
323
300
623
36,496
12,350
601
49,447
Origination and reversal of temporary differences
(6,493)
(50,116)
Adjustments in respect of prior year
Change in tax rates
Total income tax credit
The effective tax rate is 1.8% (2021: 25.88%) and is explained below:
Loss before tax
Tax at statutory rate of 19% (2021: 19%)
Tax effects of:
Adjustments in respect of prior year
Expenses not deductible
State taxes
Effect of higher tax rates in other jurisdictions
Losses not recognised / (recognised) in the year
Effect of change in tax rate
(764)
(1,707)
(8,964)
(9,771)
795
(13,298)
(62,619)
(48,213)
21
2022
£'000
2021
£'000
(549,728)
(186,287)
(104,448)
(35,395)
(3,789)
57,115
-
350
42,708
(1,707)
(9,771)
5,144
20,387
(869)
1,943
(26,126)
(13,297)
(48,213)
The standard rate of corporation tax in the UK is 19%. The main rate of UK corporation tax will increase from 19% to 25%
with effect from 1 April 2023. This change was introduced by Finance Act 2021 and substantively enacted on 24 May 2021.
The effective tax rate is 1.8% (2021: 25.9%), based on a total tax credit of £9.8m (2021: £48.2m). The effective tax rate differs
from the average statutory rate of 19%. This is primarily due to a movement in deferred tax not recognised (-7.8%), and the
impact of goodwill impairment (-9.3%).
At the balance sheet date the total net deferred tax liability is £76.6m (2021: £73.8m). The deferred tax liability in respect of
intangible assets recognised on consolidation was £150.8m (2021: £151.6). The deferred tax asset in respect of tax losses
recognised was £54.8m (2021: £60.2m). There were £57.8m of unrecognised deferred tax assets in respect of tax losses at
the balance sheet date (2021: £nil). This non-recognition has an impact on the income statement tax credit, and this is one
of the primary reasons for the effective tax rate being below the statutory rate.
193
194
Annual Report 2022 10. Business combinations
2022 Business combinations
During 2022, the Group has concluded on the fair value of the net assets in respect of acquisitions completed in 2021,
resulting in a decrease of £2.4m in net assets and a corresponding increase in goodwill. Cash flows from investing activities
include a cash outflow of £5.7m relating to acquisitions has been recognised in the statement of cash flows. This amount
relates to the finalisation of completion accounts net of the payment of contingent consideration in the period.
2021 Business combinations
Details of the acquisitions are as follows:
Business
Country
of incorporation
Nature
of activity
Date
of acquisition
Purchase
consideration
£’000
Percentage
ownership
Dermstore
USA
Professional skincare online retailing
2 February 2021
260,898
Indigo Environmental
England and Wales
Recycling provider
3 March 2021
6,316 1
Arrow Films
England and Wales
Motion picture distribution activities
5 March 2021
18,490 2
More Trees
England and Wales
Tree planting
1 April 2021
3,227 3
Private Label Nutrition
England and Wales
Vitamin, mineral and
supplement manufacturer
16 April 2021
3,6674
Preston Plastics
England and Wales
Recycling provider
27 April 2021
18,881
Brighter Foods
England and Wales
Bentley Laboratories
USA
Manufacturing and
developing cold-pressed
and cold form snack bars
Prestige skincare and
haircare manufacturing
11 May 2021
43,800 5
15 June 2021
177,602
Cult Beauty
England and Wales
Online beauty retailer
3 August 202
289,302
1. Contingent consideration as at 31 December 2022 was £1.8m, which is dependent upon performance targets post acquisition
2. Contingent consideration as at 31 December 2022 was £0.3m, which is dependent upon performance targets post acquisition
3. Contingent consideration as at 31 December 2022 was £2.7m, which is dependent upon performance targets post acquisition
4. Contingent consideration as at 31 December 2022 was £6.5m, which is dependent upon performance targets post acquisition
5. Contingent consideration as at 31 December 2022 was £1.2m, which is dependent upon performance targets post acquisition
100%
100%
100%
100%
100%
100%
100%
100%
100%
2021 Contingent consideration
The contingent consideration arrangements require the Group to pay the former owners based on performance targets
post-acquisition. The potential undiscounted amount of all future payments that the Group could be required to make
under the contingent consideration arrangements is between £nil and £19.3m. The performance targets are based on
EBITDA or revenue.
The fair value of the contingent consideration arrangements of £15.2m was estimated by applying the probability of the
hurdles being reached as at December 2022. The fair value estimates are based on an assumed probability of 79%.
The following intangible assets were recognised at acquisition:
Dermstore
Indigo
Environmental
Arrow
Films
More
Trees
Private
Label
Nutrition
Preston
Plastics
Brighter
Foods
Bentley
Laboratories
Cult
Beauty
Total
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Intangible assets
- brands
Intangible assets
- customer lists
Intangibles -
other intellectual
property
216,949
180
3,000
-
-
493
5,700
-
-
Deferred tax
(56,407)
(156)
(2,078)
Total fair value
on acquisition
160,542
517
6,622
-
-
-
-
-
228
488
1,200
19,989
252,702
494,736
1,001
2,596
24,700
26,014
-
-
-
3,119
-
-
60,504
3,119
(290)
(731)
(6,315)
(12,771)
(61,744)
(140,492)
939
2,353
19,585
36,351
190,958
417,867
The amounts recognised in respect of the fair value of identifiable assets acquired and liabilities assumed are as set out in
the table below. The exercise to determine the fair value of the acquired assets and liabilities is complete.
The final fair values of the assets and liabilities and the associated goodwill arising from the acquisitions are as follows:
Dermstore
Indigo
Environmental
Arrow
Films
More
Trees
Private
Label
Nutrition
Preston
Plastics
Brighter
Foods
Bentley
Laboratories
Cult
Beauty
Total
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Final net assets
acquired
170,261
2,736
11,754
(21)
2,042
6,607
28,359
70,656
199,692
492,086
The Group also paid £0.6m on 28 July 2021 for the trade and certain assets of Morvélo, a retailer of cycling clothing.
Goodwill
90,637
3,580
6,736
3,248
1,125
12,274
15,441
108,122
90,611
331,774
Reason for 2021 business combination
Dermstore, Cult Beauty and Bentley Laboratories expand THG’s presence in the beauty sector with globally recognised
brands, including in the US market and also provide in-house skincare and haircare new product development capabilities
and manufacturing.
Brighter Foods and Private Label Nutrition enhance THG’s vertical integration strategy with the production and retail of
bars, vitamins, minerals and supplements and will accelerate future development in this area.
Indigo Environmental, Preston Plastics and More Trees form part of THG Eco and are part of THG’s strategy to off-set THG’s
existing usage and footprint and to enhance THG’s processing capabilities to provide sustainability solutions and consulting
to THG’s suppliers, partners and customers.
Arrow Films will facilitate THG’s vertical integration of retail and wholesale physical film content as well as providing digital
opportunities and growth potential in this area.
Purchase
consideration
260,898
6,316
18,490
3,227
3,167
18,881
43,800
178,778
290,303
823,860
Transaction costs
2,430
237
336
182
198
547
781
1,245
3,518
9,474
The goodwill recognised in the prior year has not been restated following the finalisation of completion accounts.
Instead goodwill in the current year has been adjusted for £2.4m to reflect these changes to the final fair value of the
net assets acquired.
The purchase consideration in total was £822.2m, which was materially finalised in 2022. This comprised of cash totalling
£807.0m plus contingent consideration totalling £15.2m. Transaction costs comprise mainly of advisor fees, including financial,
tax and legal due diligence costs and these are included in acquisition – legal and professional costs in adjusted items in note 4.
195
196
Annual Report 2022
2021 Goodwill
11.
Intangible assets
The goodwill is attributable to the cost synergies and cross-selling opportunities that are expected to be achieved from
incorporating the businesses into the Group’s platform. This will support existing operations. In the case of Bentley
Laboratories, includes the expertise and skillset of the workforce which will lead to a further enhancement of our presence
in the divisions in which the Group operate. Bentley has an industry-leading research and development team of 25 who
are at the forefront of its clients’ innovation strategies, with over 650 unique formulations and over 700 new product
launches since 2017. The Goodwill for Cult Beauty and Dermstore also includes a significant amount for the expertise and
skillset of the workforce, reflecting the existence of a well-trained, organised and efficient workforce of over 200 people for
Cult Beauty and approximately 100 for Dermstore. The Goodwill for all acquisitions apart from Bentley Laboratories is not
deductible for tax purposes.
Cash flows arising from the acquisitions in the prior year were as follows:
Dermstore
Indigo
Environmental
Arrow
Films
More
Trees
Private
Label
Nutrition
Preston
Plastics
Brighter
Foods
Bentley
Laboratories
Cult
Beauty
Total
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
260,898
6,316
18,490
3,227
2,667
18,881
43,800
179,956
291,302
825,537
-
(1,750)
(3,000)
(2,738)
-
(6,000)
(1,200)
-
-
(14,688)
(9,698)
(572)
(7,479)
(11)
(477)
(178)
(2,646)
(703)
(20,595)
(42,359)
Purchase
consideration
Contingent
consideration
Cash and cash
equivalents
acquired
Net cash flows
251,200
3,994
8,011
478
2,190
12,703
39,954
179,253
270,707
768,490
Goodwill
Platform
development costs
Intellectual
property
Brands
New product
development
Total
£’000
£’000
179,742
146,749
Cost or valuation
At 1 January 2021
Transfers
Additions
£’000
421,684
-
78
Business combinations (note 10)
329,401
Currency translation
Disposals
At 31 December 2021
3,919
-
755,082
At 1 January 2022
755,082
Transfers
Additions
Business combinations (note 10)
Currency translation
Disposals
At 31 December 2022
Accumulated amortisation
At 1 January 2021
Transfers
Amortisation
Impairment loss
Currency translation
Disposals
-
-
2,375
33,520
-
790,977
270
-
-
33,359
-
-
At 31 December 2021
33,629
At 1 January 2022
Transfers
Amortisation
Impairment loss
Currency translation
Disposals
33,629
-
-
271,003
-
-
At 31 December 2022
304,632
NBV
At 1 January 2021
At 31 December 2021
At 31 December 2022
421,414
721,453
486,345
£’000
110,170
(1,474)
2,559
494,736
1,933
(566)
£’000
£’000
4,765
195
3,710
-
1
-
863,110
(6,724)
78,069
887,760
8,739
(43,426)
607,358
8,671
1,787,528
607,358
8,671
1,787,528
-
353
-
33,045
-
-
4,513
-
29
-
2,592
81,115
2,375
73,052
(9,495)
1,474
24,135
63,623
2,858
(41,249)
197,590
197,590
-
20,736
-
6,110
(464)
223,972
640,756
13,213
1,937,167
61,621
-
35,921
4,637
420
(41,249)
61,350
61,350
-
28,980
2,194
3,263
(464)
95,323
22,121
-
24,682
-
36
(566)
46,273
46,273
-
38,274
20
3,386
-
87,953
1,365
-
1,536
-
-
-
2,901
2,901
-
1,884
373
7
-
5,165
188,817
(3,438)
99,033
39,755
452
(43,383)
281,236
281,236
-
108,975
273,590
7,099
(9,495)
661,405
85,128
136,240
128,649
88,049
561,085
552,803
3,400
5,770
8,048
674,293
1,506,292
1,275,762
(6,919)
47,587
-
28
(1,611)
218,827
218,827
2,592
55,513
-
348
(9,031)
268,249
103,440
(3,438)
36,894
1,759
(4)
(1,568)
137,083
137,083
-
39,837
-
443
(9,031)
168,332
76,302
81,744
99,917
197
198
Included within Intellectual property is £4.4m (2021: £3.3m) of capitalised costs incurred to obtain a contract with a
customer. The costs relate to sales commissions paid to sales personnel upon initial acquisition of a customer contract.
Amortisation of £0.8m (2021: £0.6m) was recognised in the period in relation to these assets.
Annual Report 2022 Impairment tests for goodwill and other intangible assets
Goodwill and intangible assets that have an indefinite useful life are subject to annual impairment testing, or more frequently
if there are indications of impairment.
Intangible assets and goodwill are reviewed by assessing the appropriate cash generating units (CGUs) annually, which are
identified based on the smallest identifiable group of assets that generate cash inflows largely independently.
Following the completion of the divisional reorganisation, the Directors have assessed the identified CGUs of the Group
at 31 December 2022. The Directors have concluded that as a result of the reorganisation there has been a change in
CGUs. The divisional reorganisation has led to the assets and cash flows of each division being separately identifiable. The
Directors have concluded that there are now six CGUs within THG, being THG Beauty, THG Nutrition, THG Ingenuity, THG
OnDemand, THG Luxury and THG Experience. This corresponds to the organisational structure that changed during the year.
Separately-identifiable cash flows are only available for the Group’s operating segments and therefore CGUs are consistent
with the new operating segments also identified in 2022 (see note 2). Note that the discontinued categories segment
primarily relates to THG OnDemand.
Goodwill has arisen from previous business combinations across the Group and is allocated to the CGUs that are expected
to benefit from the synergies of those acquisitions. The recoverable amounts of these CGUs are the higher of fair value less
costs to dispose (FVLCTD) and value-in use (VIU).
Management has reviewed each CGU in turn and has adopted the VIU approach for THG Nutrition and THG Experience,
with a FVLCTD approach being adopted for THG Beauty, THG Ingenuity, THG OnDemand and THG Luxury to establish a
recoverable amount under IAS 36.
THG Beauty (Goodwill totalling £353.2m with an indefinite life after impairment charge) and THG Ingenuity
(Goodwill totalling £nil after impairment charge)
For both THG Beauty and THG Ingenuity, management has estimated a FVLCTD using a discounted cashflow method. This
method relies on inputs not normally observable by market participants and is therefore categorised at Level 3 in the fair
value hierarchy.
The directors concluded that FVLCTD was more appropriate for valuing the Group because for both of these CGUs the cash
flows will be generated from the future growth expectation which is not captured in a standard length of a VIU calculation.
For THG Beauty this is due to the strong growth anticipated within online beauty markets, in part driven by continued online
adoption and combined with the high growth expectation from the acquisitions that have been completed in recent years,
including Dermstore and Cult Beauty. For THG Ingenuity future growth is expected driven by the capital investment made in
the platform and global infrastructure, principally warehousing as well as the continued drive by global industry to digitalise
their business models.
The key assumptions made are as follows:
THG Beauty
Key Assumption
Discount rate
The discount rate is based on the weighted average cost of capital of a typical market participant. The post-tax discount rate used is
12.9% (pre-tax discount rate 17.2%). The discount rate reflects an upwards adjustment for a risk premium input.
Forecast cash flows
Forecasts are based on assumptions from the Board approved budget with projections extending eight years. The key assumptions
within the impairment assessment are the future revenue growth and EBITDA margin in the forecasts, as well as discount and
interest rates. The projections, are based on the best estimate of future cash flows, taking into account growth from the high repeat
nature of the beauty customer base, the strong growth anticipated in the beauty markets. The market in which THG Beauty operates
is expected to continue to grow as documented by wider market commentary, supported by digital shift to online (given relatively
low levels of online penetration), as well as further international opportunities all resulting in double digit growth rates. The directors
believe the forecasts are reasonable and consistent with the strategy and are underpinned by market data.
Long-term
growth rate
A long-term growth rate of 3.0% was used for cash flows after the eight year period which is based on the long-term growth rate
across the beauty market.
An impairment charge of £182.9m has been recognised within the THG Beauty CGU in respect of goodwill. This has
arisen largely due to reviewing the recoverable amount of this CGU at a more granular level than was previously possible
following the completion of the divisional reorganisation during the year, as well as more challenging global markets
following the macroeconomic, inflationary and interest rate pressures driven by, amongst other things, the Russia-Ukraine
conflict. This macroeconomic uncertainty has adversely impacted many markets and in particular growth stocks.
THG Beauty has completed a significant amount of acquisitions in the past few years which have generated a substantial
amount of intangible assets on balance sheet. These factors combined with the challenging macroeconomic environment
impacting several of the key assumptions, particularly the discount rate, has led to the impairment of some of the goodwill
that has arisen on these acquisitions.
The impairment charge is recorded within administrative expenses and adjusting items within the consolidated
income statement.
Management has performed sensitivity analysis on the key assumptions in the impairment model using reasonably
possible changes in these key assumptions. There are possible downside risks to the forecasts including if there was
a reduction in revenue of 5.0% per annum this would give a further impairment of £62m; a margin reduction of 50bps
per annum, £108m; and an increase in discount rate of 1.0%, £50m. None of these scenarios reflect potential mitigations,
including cost reduction. Cost reductions that could be implemented by management would be deferring non-essential
capex and increased cost control, such as reducing stock levels and new customer marketing investment.
THG Ingenuity
Key Assumption
Discount rate
Discount rates are based on the weighted average cost of capital of a typical market participant. The post tax discount rate used is
13.3% (pre-tax discount rate 17.7%). The discount rate reflects an upwards adjustment for a risk premium input given the nascent
nature of this CGU.
Forecast cash flows
Forecasts are based on assumptions from the Board approved budget with projections extending ten years. The key assumptions
within the forecasts are the future revenue growth and EBITDA margin along with capital expenditure. The projections, are based on
the best estimate of future cash flows, taking into account growth from the high levels of investment in our global infrastructure and
the success of the new strategy launched in 2022. The strategy targets certain high growth key territories and markets. The result of
the historic and ongoing investment combined with the expected market growth is a double digit growth rate within this CGU. The
Directors believe the forecasts are reasonable and consistent with the strategy adopted by Ingenuity.
Long-term
growth rate
A long-term growth rate of 3.0% was used for cash flows after the ten year period which is based on the long-term growth rate
across digital markets.
An impairment charge of £87.0m has been recognised within the THG Ingenuity CGU in respect of goodwill. This has
arisen largely due to reviewing the recoverable amount of this CGU at a more granular level than was previously possible
following the completion of the divisional reorganisation during the year. Following the appointment of our new CEO of
THG Ingenuity in 2022, the Group has repositioned its strategy. Management believe they have made sensible growth
assumptions given the recent change in strategy, but however notes that the addressable market and the growth
rate prospects of the sectors in which THG Ingenuity operates provide the opportunity for significant growth as the
strategy embeds. Alongside this, THG Ingenuity has made significant investment for the future in its platform and global
infrastructure network. These factors combined with the challenging macroeconomic environment impacting several of
the key assumptions, particularly the discount rate, has led to the impairment of the historic Goodwill within the CGU. The
Directors consider that if valued on a replacement cost basis, the valuation of the remaining intangible and tangible assets
would be equal to, or in excess of, the carrying value.
The impairment charge is recorded within administrative expenses and adjusting items within the consolidated
income statement.
Management has performed sensitivity analysis on the key assumptions in the impairment model using reasonably
possible changes in these key assumptions. There are possible downside risks to the forecasts including if there was a
reduction in revenue of 5.0% per annum this would give a further impairment of £295m; a margin reduction of 50bps
per annum, £262m; and an increase in discount rate of 1.0%, £57m. None of these scenarios reflect potential mitigations,
including cost reduction. Cost reductions that could be implemented by management would be deferring non-essential
capex and increased cost control, such as investment in the platform.
199
200
Annual Report 2022 THG OnDemand and THG Luxury (Goodwill totalling £nil)
12.1 Property, plant and equipment
THG OnDemand CGU and THG Luxury CGU include categories and territories that management has now chosen to exit
following the completion of the Strategic Review of these businesses in Q1 2023. As such, management has estimated
a FVLCTD for specified assets. FVLCTD are valued using Level 3 fair value hierarchy inputs based on management’s
estimate of the recoverable amount of the assets within these divisions.
An impairment charge of £2.2m has been recognised within THG OnDemand CGU and £1.6m within THG Luxury CGU
both in respect of other intangibles. This is driven by the decision to exit loss-making categories and territories.
The impairment charge is recorded within administrative expenses and adjusting items - Impairment of assets within the
discontinued categories in the consolidated income statement.
THG Nutrition (Goodwill totalling £133.1m with an indefinite life)
The key assumptions used within the VIU calculation are:
Key Assumption
Discount rate
The post tax discount rate used is 9.1% (pre-tax discount rate 11.7%).
Forecast cash flows
The VIU calculation uses cash flow projections from financial budgets approved by the Board covering a five year period. The key
assumptions within the forecasts are the future revenue growth and EBITDA margin.
Long-term
growth rate
A long-term growth rate of 3.0% was used for cash flows after the five year period which is based on the long term growth rate
across online sports and nutrition retailing.
No impairment has been recognised for THG Nutrition.
Management has performed sensitivity analysis on the key assumptions in the impairment model using reasonably
possible changes in these key assumptions. There are no reasonably possible changes in key assumptions that would lead
to an impairment.
THG Experience (Goodwill totalling £nil)
The key assumptions used within the VIU calculation are:
Key Assumption
Discount rate
The post tax discount rate used is 8.8% (pre-tax discount rate 10.9%).
Forecast cash flows
The VIU calculation uses cash flow projections from financial budgets approved by the Board covering a five year period. The key
assumptions within the forecasts are the future revenue growth and EBITDA margin.
Long-term
growth rate
A long-term growth rate of 3.0% was used for cash flows after the five year period which is based on the long term growth rate
across the UK hospitality industry.
As explained within note 12.2, an impairment charge of £1.8m was recognised in respect of non-core assets when classified
as held for sale during the year to reflect the difference between their carrying value and expected selling price. No
additional impairment has been recognised for any remaining assets within the THG Experience CGU.
At 31 December 2022, the recoverable amount is determined on a VIU calculation using cash flow projections and the
FVLCTD for specified non-core assets held for sale. FVLCTD are valued using Level 2 fair value hierarchy inputs based on
quoted prices in an active market.
Management has performed sensitivity analysis on the key assumptions in the impairment model using reasonably
possible changes in these key assumptions. There are no reasonably possible changes in key assumptions that would lead
to an impairment.
201
Motor
vehicles
Plant and
machinery
Fixtures
and fittings
Computer
equipment
and software
Leasehold
improvements
and freehold
buildings
£’000
70,080
45,277
11,877
-
(541)
(245)
£’000
74,435
36,125
765
-
(859)
(3,016)
£’000
66,942
28,667
738
6,722
(44)
£’000
103,751
15,991
3,380
-
131
(2,551)
(250)
126,448
107,450
100,474
123,003
459,707
Total
£’000
317,263
126,179
16,973
6,722
(1,314)
(6,116)
At 1 January 2022
2,332
126,448
107,450
100,474
123,003
459,707
Cost
At 1 January 2021
Additions
Business combinations
Transfers
Currency translation differences
Disposals
At 31 December 2021
£’000
2,055
119
213
-
(1)
(54)
2,332
Additions
Transfer to assets held
for sale (note 12.2)
Transfers
Currency translation differences
Disposals
At 31 December 2022
Accumulated depreciation
At 1 January 2021
Depreciation (note 3)
Impairment
Transfers
Currency translation differences
Disposals
At 31 December 2021
At 1 January 2022
Depreciation (note 3)
Impairment of assets
held for sale
Transfer to assets held
for sale (note 12.2)
Currency translation differences
Disposals
At 31 December 2022
NBV
At 1 January 2021
At 31 December 2021
At 31 December 2022
12
-
-
-
(27)
2,317
1,095
250
-
-
-
(54)
1,291
1,291
323
-
-
-
(27)
1,587
960
1,041
730
16,370
(702)
(2,592)
3,137
(263)
40,461
(6,831)
-
2,461
(2,148)
143,100
141,393
21,446
-
-
2,031
(5,232)
118,719
17,309
(17,071)
-
478
-
95,598
(23,902)
(2,592)
8,107
(7,670)
123,719
529,248
20,442
18,478
9,038
11,623
5,533
-
242
(251)
26,185
26,185
16,238
-
-
840
(160)
43,103
6,833
2,555
-
(147)
(1,344)
28,339
28,339
9,799
1,831
(1,831)
409
(2,148)
36,399
61.042
100,263
99,997
53,993
79,111
104,994
17,174
1,224
3,438
26
(2,330)
38,010
38,010
21,018
-
-
1,083
(5,230)
54,881
48,464
62,464
63,838
27,989
2,389
67
-
67
(250)
30,262
30,262
3,518
77,042
38,269
9,379
3,438
188
(4,229)
124,087
124,087
50,896
-
1,831
(674)
(2,505)
131
-
33,237
2,463
(7,565)
169,207
75,762
92,741
240,221
335,620
90,482
360,041
202
Annual Report 2022 12.2 Assets held for sale
In Q4 2022, the Group committed to a plan to sell some non-core freehold buildings that were no longer in use by the
Group and not required to execute its future strategy. In accordance with IFRS 5: Non-current assets held for sale and
discontinued operations, the assets were classified as held for sale on the Groups statement of financial position at 31
December 2022. Immediately before the classification as an asset held for sale, the recoverable amount was estimated and
an impairment loss of £1,831,000 was recognised to reduce the carrying amount of the assets to their fair value less costs to
sell. This was recognised within adjusted items (note 4) as this was a one-off charge outside the normal course of business.
The assets held for sale are valued using Level 2 fair value hierarchy inputs based on quoted prices in an active market.
As at 31 December 2022, there was no further write-down as the carrying amount of the assets held for sale did not
fall below their fair value less costs to sell. These assets were previously recognised within the THG Ingenuity and THG
Experience operating segments.
Assets classified as held for sale
Transfer from property, plant and equipment (note 12.1)
13.
Inventories
Goods held for resale
Raw materials
Goods in transit
2022
£'000
21,397
21,397
2022
£'000
2021
£'000
-
-
2021
£'000
296,133
378,605
72,327
4,811
80,542
7,634
373,271
466,781
Goods in transit relate to goods whose control is still to be transferred to the customers as of the reporting date. The cost
of inventories recognised as an expense and included in cost of sales amounted to £1,272.9m (2021: £1,178.7m). The value of
inventories written down and recognised as an expense in the statement of comprehensive income in the year was £8.6m
(2021: £7.6m). Within goods held for resale is a £3.0m (2021: £3.0m) right to recover asset which represents the carrying
value of inventory expected to be received back from customers as returns.
14. Financial assets and liabilities
Assets as per balance sheet – financial assets
Trade and other receivables excluding non-financial assets
Cash and cash equivalents
Investments
Assets as per balance sheet - held at fair value through OCI
Derivative financial instruments designated as hedging instruments
Derivative financial instruments held at fair value through profit and loss
203
Note
15
16
2022
£'000
2021
£'000
162,835
157,345
473,783
536,827
1,400
1,400
21,567
301
2,400
300
659,886
698,272
Liabilities as per balance sheet – other financial liabilities at amortised cost
Bank borrowings
Lease liabilities
Trade and other payables excluding non-financial liabilities
Liabilities as per balance sheet - other financial liabilities at fair value
Derivative financial instruments designated as hedging instruments
Derivative financial instruments held at fair value through profit and loss
Derivative financial instruments designated as hedging instruments
FX forwards hedging foreign exchange risk on borrowings
Interest rate swaps
FX forwards hedging foreign exchange risk on highly probable future cash flows
Note
18
22
17
2022
£'000
2021
£'000
679,189
489,865
334,376
574,994
4,189
-
349,173
645,712
21,342
601
1,592,748
1,506,693
(3,377)
(21,342)
21,567
(812)
17,378
621
1,779
(18,942)
Financial instruments included within current assets and liabilities, excluding borrowings, are generally short-term in nature
and accordingly their fair values approximate to their book values. Bank borrowings are initially recorded at fair value net of
direct issue costs.
The derivative financial instruments designated as hedging instruments have been recognised at fair value through
Other Comprehensive Income. Hedging instruments used are measured based on observable inputs and have been
classified at Level 2 hierarchy level in line with IFRS 13 ‘Fair Value Measurement’.
During 2021, derivative financial instruments held at fair value through profit and loss related solely to the option to invest in
THG Ingenuity held by SBM, announced on the 10 May 2021. This was to allow for an investment of c.$1.6bn for a 19.9% of
THG Ingenuity equity once THG Ingenuity has been separated into an investable entity.
The derivative was recognised at fair value and was valued based on a Black-Scholes model utilising market-corroborated
inputs and had been classified as Level 2.
On 26 July 2022, the Group announced that in light of global macroeconomic conditions, the SBM option agreement had
been terminated by mutual agreement. The call option granted by THG to SBM will not therefore be, and will cease to
be capable of being exercised. At 31 December 2022, the option has therefore been derecognised, with the impact of the
derecognition being reflected within finance costs.
The Group has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the foreign exchange,
interest rate, and cash flow contracts are identical to the hedged risk components. To test the hedge effectiveness, the
Group uses the hypothetical derivative method and compares the changes in the fair value of the hedging instruments
against the changes in fair value of the hedged items attributable to the hedged risks. All the hedging activities and
derivatives are established to be effective. The changes in counterparty credit risk had no material effect on the hedge
effectiveness assessment for derivatives.
2022
Notional
Derivatives hedging foreign exchange risk on borrowings
Derivatives hedging interest rate risk on borrowings
Derivatives hedging foreign exchange risk on future cash flows
1.
Impact on OCI is shown net of deferred tax.
Notional
Impact on OCI1
Recycled through
statement of
comprehensive
income
€600,000,000
€600,000,000
£150,608,646
£'000
(4,013)
15,710
(1,943)
£'000
18,714
759
(3,830)
204
Annual Report 2022 Liquidity risk
Interest rate risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group regularly forecasts cash flows and maintains an appropriate balance of cash and debt facilities to ensure that
sufficient funds are available to cover future expenses and capital expenditure.
The Group held €600m notional of forward contracts expiring in December 2024 and €600m notional of interest swaps
expiring in December 2026. Maturity of the Group’s derivative and non-derivative financial liabilities are given below.
Included within trade payables is £53.7m (2021: £42.3m) due to suppliers that participate in the Group’s supply chain
financing agreement. The agreement does not change the suppliers agreed payment terms directly with the Group.
Contractual amount
Carrying
amount
Total
Less than
3 months
3 to 12
months
1 to 2 years
2 to 5 years
More than
5 years
£'000
£'000
£'000
£'000
£'000
£'000
£'000
679,189
334,376
574,145
4,189
489,865
349,173
645,712
21,943
691,808
447,847
574,145
4,189
502,962
499,770
645,712
21,943
-
12,188
568,486
-
-
10,653
615,748
-
30,991
31,942
5,659
-
752
32,112
29,964
21,943
-
44,289
-
4,189
-
39,353
-
-
660,817
87,148
-
-
502,210
105,567
-
-
-
272,280
-
-
-
312,085
-
-
31 December 2022:
Bank borrowings
Lease liabilities
Trade payables
Derivative financial liabilities
31 December 2021:
Bank borrowings
Lease liabilities
Trade payables
Derivative financial liabilities
The fair value of bank borrowings at 31 December 2022 was £686.6m (2021: £503.3m). There is no material difference
between the fair value and the carrying value of the bank borrowings.
Foreign currency risk
The Group trades internationally and is exposed to exchange rate risk on purchases (Euro, US dollars, and Polish Zloty) and
sales (primarily in Euro and US dollars). The Group’s results are presented in Sterling and are thus exposed to exchange
rate risk on translation of foreign currency assets and liabilities.
The Group’s approach to managing foreign exchange risk is to designate cash flow hedges across a combination of for-
wards and spot transactions, whose fair value is based on the observable market value of the respective instrument, taking
into account foreign exchange rates and market volatility at the balance sheet date.
The Group is also exposed to EUR:GBP exchange rate risk on a €600m loan within the Group and mitigates this risk
through the use of hedging instruments in the form of FX forward contracts.
As at 31 December 2022, the Group held €600m notional of forward contracts expiring in December 2026.
The Group’s foreign exchange exposure is predominantly Euro, US Dollars and Polish Zloty. If the closing exchange rate was
5% higher/lower, the Group’s statement of Comprehensive Income would be impacted as follows:
2022
2022
2021
2021
Change in foreign
exchange rate
Effect on change
in EUR rate 1
Effect on change
in USD rate2
Effect on change
in PLN rate
+5%
-5%
+5%
-5%
£'000
(271)
300
20
(22)
£'000
3,222
(3,561)
4,554
(5,034)
£'000
2,834
(3,132)
1,832
(2,025)
1. If the closing exchange rate was 5% higher/lower, the impact on Group Equity would be £10.4m (2021: £11.7m) reflecting the impact of the derivative hedges
associated with the €600m term loan B.
2. If the closing exchange rate was 5% higher/lower, the impact on Group Equity would be £33.5m reflecting the impact of the substantial other intangible
assets denominated in USD.
205
The Group is exposed to EURIBOR and SONIA through its loan facilities and has entered into a series of interest rate swap
agreements to mitigate this risk. As of 31 December 2022, the Group held €600m expiring December 2026. Interest rate
sensitivity is summarised in note 18. The Group’s financial risks are detailed on pages 88-93 in this Annual Report.
Changes in liabilities arising from financing activities
The changes in liabilities arising from financing activities are presented below:
1 January 2022
Cash flows
New leases
& Lease
modifications
Proceeds
from bank
borrowings
Foreign exchange
movement
Other
31 December
2022
£’000
£’000
489,865
349,173
(24,469)
(49,013)
£’000
-
10,930
£’000
156,000
-
£’000
27,326
9,156
£’000
30,467
14,130
£’000
679,189
334,376
839,038
(73,482)
10,930
156,000
36,482
44,597
1,013,565
1 January 2021
Cash flows
New leases
& Lease
modifications
Foreign exchange
movement
Other
31 December
2021
£’000
526,159
236,185
£’000
(25,359)
(36,216)
£’000
-
137,158
762,344
(61,575)
137,158
£’000
(37,867)
(304)
(38,171)
£’000
26,932
12,350
£’000
489,865
349,173
39,282
839,038
Borrowings
Lease liabilities
Total liabilities from
financing activities
Borrowings
Lease liabilities
Total liabilities from
financing activities
The ‘Other’ column includes the effect of accrued interest on interest-bearing loans and borrowings, including lease
liabilities and the effect of prepaid loan fees. The Group classifies interest paid as cash flows from financing activities.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading
to a financial loss. The Group is exposed to credit risk from its operating activities, primarily trade receivables. The Group
monitors and reviews exposure to credit risk on an ongoing basis and makes best efforts to ensure recoverability of amounts
owed to the Group. Information about the credit risk exposure on the Group’s trade receivables is disclosed in note 15.
15. Trade and other receivables
Trade receivables
Less: loss allowance
Net trade receivables
Prepayments
Accrued income
Other taxation and social security
Other receivables
2022
£'000
121,122
(1,805)
119,317
28,362
40,004
33,748
43,518
264,949
2021
£'000
119,567
(2,268)
117,299
21,372
58,329
26,883
40,046
263,929
Trade and other receivables are principally denominated in Sterling.
At 31 December 2022, there were 160,809,675 fully vested, but partly paid and unlisted Shares (31 Dec 2021: 161,439,766).
The average amount of unpaid share capital per fully vested but partly-paid and unlisted Share is £0.17 (2021: £0.16)
representing a receivable to the Group of £26.9m (2021: £27.0m). The movement in the year is all due to certain fully vested
but partly paid and unlisted Shares being paid-up and converted to Ordinary Shares.
206
Annual Report 2022
At 31 December 2022 the ageing of trade receivables was as follows:
Not due
0 to 3 months overdue
More than 3 months overdue
The movement in the loss allowance of trade receivables was as follows:
2022
£'000
61,178
43,318
14,626
121,122
At 1 January 2022
Charge for the year
Released
Utilised
Foreign exchange movement
At 31 December 2022
The Group’s credit risk exposure on trade receivables using a provision matrix is as follows:
Expected credit loss rate
Estimated total gross carrying amount at default
Expected credit loss
At 31 December 2022
Current
0 – 30
days
31 – 60
days
61 – 90
days
0.64%
67,787
(439)
1.18%
24,320
(287)
67,348
24,033
0.14%
9,584
(14)
9,570
1.74%
6,509
(113)
6,396
90+
days
7.37%
12,922
(952)
11,970
2021
£'000
65,399
47,264
6,904
119,567
£'000
2,268
2,160
(2,741)
(93)
211
1,805
Total
121,122
(1,805)
119,317
The Group has adopted IFRS 9 applying the simplified approach to measure the expected credit losses. This uses a lifetime
expected loss allowance for all trade receivables. No provision is required in respect of accrued income.
16. Cash and cash equivalents
Cash and cash equivalents
2022
£'000
2021
£'000
473,783
536,827
Cash and cash equivalents includes amounts receivable of £3.1m (2021: £3.6m) from banks and £17.4m (2021: £8.9m)
from payment providers, for credit and debit card transactions. Such amounts clear the bank shortly after the transaction
takes place.
17.
Trade and other payables
Trade payables
Accruals
Other taxation and social security
Other payables
Government grants
Contingent consideration on acquisitions
207
2022
£'000
321,709
244,553
58,811
1,880
2,635
6,852
2021
£'000
297,539
326,957
28,259
6,160
2,592
15,056
636,440
676,563
The Directors consider the carrying amount of trade and other payables approximates to their fair value when measured by
discounting cash flows at market rates of interest as at the balance sheet date.
Contingent consideration on acquisitions is measured at fair value using unobservable inputs (level 3 of the fair value
hierarchy). The unobservable inputs used in the fair value calculation include internal data such as forecasts, budgets and
actual results to date. The fair values are sensitive to changes in EBITDA or revenue given that these key metrics are what
the performance targets are based on. The reduction year on year is driven by payments made of £7.6m, plus £0.5m of
hindsight adjustments.
Included within trade payables is £53.7m (2021: £42.3m) due to suppliers that participate in the Group’s supply chain
financing agreement. The agreement does not change the suppliers agreed payment terms directly with the Group.
18.
Interest-bearing loans and borrowings
Current
Bank borrowings
Lease liabilities
Non-current
Bank borrowings
Lease liabilities
Note
22
22
2022
£’000
30,992
43,995
74,987
648,197
290,381
938,578
2021
£’000
752
43,342
44,094
489,113
305,831
794,944
Bank borrowings relate predominantly to the 7-year Euro term loan B, undrawn 5-year revolving credit facility and an
incremental facility obtained during the year. The revolving credit facility is provided by Barclays, HSBC, Santander,
Citibank, NatWest and JPM. The term loan B carried an interest rate of 4.50% plus EURIBOR and the revolving credit
facility interest rate is SONIA. The Group increased its bank borrowings in 2022 with an incremental facility obtained
plus Commercial Facility Loan. This loan is provided by the Groups existing lenders and carries a base rate of Daily RFR
(SONIA). The floating element of the term loan B is hedged by interest rate derivatives. Management note that EURIBOR is
being reformed as a benchmark rate and are in dialogue with its lending and hedging partners to minimise the impact on
the Group as transition occurs.
If interest rates moved by 100bps, the Group’s loss before tax would be c.£3.7m higher / lower (2021: c.£5.1m) and the
subsequent move on the derivative valuation would cause equity to be c.£18.5m higher / lower (2021: c.£12.5m) as a result
of the same move.
Net debt consists of loans and lease liabilities, less cash and cash equivalents, defined as referenced in note 22. For the
purpose of the Group’s net debt calculation, loans that are denominated in foreign currency are translated at the effective
hedged rate where applicable. Net (debt)/cash is an alternative performance measure and is not defined under IFRS. A
reconciliation to the most directly comparable IFRS measure is included below:
Loans and other borrowings
Lease liabilities
Cash and cash equivalents
Sub-total
Adjustments:
Retranslate debt balance at swap rate where hedged by foreign exchange derivatives
Net debt
Net (debt)/cash before lease liabilities
The contractual maturity analysis of bank borrowings and lease liabilities are given in note 14.
2022
£'000
(679,189)
(334,376)
473,783
(539,782)
24,782
(515,000)
(180,624)
2021
£'000
(489,865)
(349,173)
536,827
(302,211)
(2,548)
(304,759)
44,414
208
Annual Report 2022
19. Provisions
At 1 January 2022
Acquired
Utilised
Created
Released
Discount unwind
FX on retranslation
At 31 December 2022
Current
Non-current
Dilapidations
£’000
16,506
-
(538)
4,497
(468)
202
606
20,805
2,760
18,045
Other
£’000
-
2,454
(680)
-
(209)
-
-
1,565
770
795
Total
£'000
16,506
2,454
(1,218)
4,497
(677)
202
606
22,370
3,530
18,840
The movement on the deferred tax liability during the year is as follows:
Accelerated
capital
allowances
Short term
timing
differences
Tax
losses
Loan
relationships
Business
combinations
Other
Total
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Opening balance 1 January 2022
1,659
(2,446)
(60,153)
(16,601)
151,615
(308)
73,766
Charged / (credited) to the statement of
comprehensive income
(Credited) to equity
Charged to OCI
Other / FX
Closing balance 31 December 2022
4,504
2,758
5,808
(9,026)
(12,756)
(252)
(8,964)
-
-
(2,802)
3,361
(142)
-
-
-
(64)
(465)
-
-
-
-
-
-
3,301
(142)
3,301
11,968
-
8,637
106
(54,810)
(25,627)
150,827
2,741
76,598
Dilapidations provisions relate to leased properties. Dilapidations provisions are made based on the best estimate of the
likely committed cash outflow and discounted to net present value. Future costs are expected to be incurred over the term
of the existing lease arrangements at the reporting date, which is a period of up to 25 years.
The following table shows the timeline in which undiscounted costs in relation to the dilapidation provision are expected to
be incurred:
Current
£'000
1-5 years
£’000
6-10 years
£’000
11-15 years
£’000
16-20 years
£’000
21-25 years
£’000
At 31 December 2022
At 31 December 2021
3,025
883
5,490
5,144
2,609
3,663
2,367
2,367
456
456
9,736
6,021
Total
£’000
23,683
18,534
Other provisions relate to onerous contracts. The amount of £2.4m acquired in the year relates to a hindsight adjustment in
relation to a prior year acquisition.
20. Contract liabilities
Contract liabilities
2022
£’000
34,256
2021
£'000
36,143
Contract liabilities are the consideration received from the customers for sales where the Group still has an obligation to
transfer goods or services, which predominately relates to THG Beauty and THG Nutrition. 100% of the transaction price of
the unsatisfied contracts as at 31 December 2021 were recognised as revenue during 2022.
21. Deferred tax
The deferred tax balance comprises:
Short term timing differences
Accelerated capital allowances
Business combinations
Tax losses
Loan relationships
Derivatives
Other balance sheet amounts
At the balance sheet date there are unrecognised tax losses of £57.8m (2021: £nil).
209
2022
£’000
106
3,361
150,827
(54,809)
(25,627)
3,558
(818)
76,598
2021
£’000
(2,446)
1,659
151,615
(60,153)
(16,601)
257
(565)
73,766
22. Leases
Set out below are the carrying amounts of the right-of-use assets recognised and movements during the period:
Motor
vehicles
Plant and
machinery
Computer
equipment
and software
Land and
buildings
£’000
£’000
£’000
As at 1 January 2021
Additions
Depreciation (note 3)
Lease modifications
Impairment
Currency translation differences
As at 31 December 2021
As at 1 January 2022
Additions
Depreciation (note 3)
Lease modifications
Disposals
Currency translation differences
539
44
(172)
-
-
(33)
378
378
-
(173)
-
-
5
665
-
(274)
-
-
(17)
374
374
-
(213)
-
-
3
As at 31 December 2022
210
164
-
6
(4)
-
-
-
2
2
-
(1)
(1)
-
-
-
Total
£’000
193,887
156,517
(32,209)
(427)
(6,856)
(630)
£’000
192,683
156,467
(31,759)
(427)
(6,856)
(580)
309,528
310,282
309,528
13,608
310,282
13,608
(42,908)
(43,295)
17,856
(11,426)
7,277
17,855
(11,426)
7,285
293,935
294,309
210
Annual Report 2022 Set out below are the carrying amounts of lease liabilities (included under note 18 interest-bearing loans and
borrowings) and the movements during the period:
As at 1 January
Additions
Accretion of interest
Payments
Lease modifications
Disposals
Currency translation differences
As at 31 December
Current
Non-current
2022
£'000
349,173
6,620
14,130
(49,012)
17,820
(13,510)
9,155
334,376
43,995
290,381
The maturity analysis of lease liabilities is disclosed in Note 14.
The Group had total cash outflows for leases of £49.0m in 2022 (2021: £36.2m).
The following are the amounts recognised in the year in the consolidated statement of comprehensive income:
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
2022
£'000
43,295
14,130
57,425
2021
£'000
236,185
137,601
12,350
(36,216)
(443)
-
(304)
349,173
43,342
305,831
2021
£'000
32,209
12,350
44,559
23. Share capital and reserves
THG PLC is a public company limited by shares and incorporated in England and Wales. It has a standard listing on the
London Stock Exchange and is the holding company of the Group. The Company has ten classes of shares; Ordinary
Shares of £0.005 each, all of which are fully paid; D1 Shares of £0.005 each; D2 Shares of £1 each, all of which are fully paid;
E Shares of £0.005 each; F Shares of £0.005 each; G Shares of £0.005 each; H Shares of £0.005 each; the Special Share of
£1, which is fully paid up; Deferred 1 Shares of £0.005 each; and Deferred 2 Shares of £0.005 each. As at 31 December 2022,
the Company’s issued share capital comprised:
Class
Ordinary Shares
D1 Shares
D2 Shares
E Shares
F Shares
G Shares
Special Share
Deferred 1 Shares
Deferred 2 Shares
2022 Number
1,265,377,243
56,082,651
17,741
48,995,797
27,122,287
17,494,614
1
313,257
21,563,860
1,436,967,451
Nominal value £ each
0.005
0.005
1
0.005
0.005
0.005
1
0.005
0.005
The rights attaching to the Shares are set out in the Director’s Report pages 98-101.
211
Capital risk management
The Group’s objectives when managing capital, which comprises equity, are to safeguard the Group’s ability to continue as
a going concern to provide returns for Shareholders and benefits for other stakeholders and to maintain an optimal capital
structure. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to Shareholders,
return capital to Shareholders, issue new Shares or sell assets to reduce debt.
During the financial year ending 31 December 2022 the following took place. The conversion of shares are in respect of the
employee share scheme:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
(xvi)
(xvii)
(xviii)
(xix)
(xx)
(xxi)
(xxii)
(xxiii)
(xxiv)
34,454 Ordinary Shares were converted from 34,454 E Shares;
88,000 Ordinary Shares were converted from 88,000 E Shares;
22,953 Ordinary Shares were converted from 22,953 E Shares;
1,606 Ordinary Shares were converted from 1,606 E Shares;
6,399 Ordinary Shares were converted from 6,399 E Shares;
44,909 Ordinary Shares were converted from 21,144 E Shares, 8,000 F Shares and 15,765 G Shares;
71 D2 Shares were subdivided into 14,200 D2 shares of £0.005 each, 13,169 of which converted into 13,169 Ordinary Shares and 1,031 of which were
reclassified as Deferred 1 Shares;
1,000 Ordinary Shares were converted from 1,000 E Shares;
15,530 Ordinary Shares were converted from 6,208 F Shares and 9,322 G Shares;
75,000 Ordinary Shares were converted from 75,000 G Shares;
1,000 Ordinary Shares were converted from 1,000 E Shares;
12,000 Ordinary Shares were converted from 12,000 G Shares;
65,000 Ordinary Shares were converted from 65,000 E Shares;
24,806,893 Ordinary Shares were issued for a total consideration of £911,722 (note 7);
1,000 Ordinary Shares were converted from 1,000 E Shares;
77,175 Ordinary Shares were converted from 16,118 E Shares, 30,497 F Shares and 30,560 G Shares;
12,168 Ordinary Shares were converted from 4,193 F Shares and 7,975 G Shares;
19,074,902 Ordinary Shares were issued for a total consideration of £1,521,117 (note 7);
19,753 Ordinary Shares were converted from 10,572 F Shares and 9,181 G Shares;
17,529 Ordinary Shares were converted from 7,048 F Shares and 10,481 G Shares;
52,026 Ordinary Shares were converted from 8,068 E Shares, 17,620 F Shares and 26,338 G Shares;
26,292 Ordinary Shares were converted from 10,572 F Shares and 15,720 G Shares;
6,538 Ordinary Shares were converted from 2,643 F Shares and 3,895 G Shares; and
4,000 Ordinary Shares were converted from 4,000 E Shares.
24. Pension commitments
During the year, the Group operated an auto-enrolment pension scheme. The scheme is managed by independent fund
managers and the Group contributes in accordance with the statutory requirements. In addition to the auto-enrolment
scheme, a subsidiary company operates a defined contribution pension scheme which is also managed by independent
fund managers and its assets and liabilities are held separately from that of the Group. The pension charge represents the
amount paid by the Group and amounted to £10.4m (2021: £7.6m). £1.1m of contributions due to the fund were outstanding
at year end (2021: £1.3m).
25. Cash flow generated from operations
Note
12
22
11
7
4
8
Loss before taxation
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation
Share-based payments
Adjusted items
Net finance costs
Operating cash flow before adjusting items
and before movements in working capital and provisions
Decrease/(Increase) in inventories
Decrease/(Increase) in trade and other receivables
(Decrease)/Increase in trade and other payables1
Decrease in provisions
Foreign exchange gain/(loss)
Cash generated from operations before adjusting items
1. Included within trade and other payables is a decrease in contract liabilities of £1.9m (2021: increase £3.2m).
Refer to the Chief Financial Officer’s Review on page 37 of this report for details regarding undrawn borrowing
facilities that may be available in the future for the operating activities and settling capital commitments.
2022
£'000
2021
£'000
(549,728)
(186,287)
50,896
43,295
108,975
10,734
345,178
54,764
64,114
79,262
1,027
(56,893)
(1,292)
1,424
87,642
38,269
32,209
99,033
-
129,829
48,223
161,276
(112,535)
(27,116)
75,189
(416)
(444)
95,954
212
Annual Report 2022
26. Earnings per share
The following table reflects the income and share data used in the basic and diluted EPS calculations:
Loss for the financial year (£'000)
Weighted average number of ordinary shares for basic EPS
Basic and Diluted EPS (£’s)
2022
2021
(539,957)
(138,074)
1,239,485,253
1,099,043,113
(0.44)
(0.13)
If the impact of impairment charges in the year was removed, the Basic and Diluted EPS would be £(0.21).
The basic loss per share has been calculated by dividing the loss attributable to the Group by the weighted average
number of ordinary shares in issue.
The diluted loss per share has been calculated by adjusting the weighted average number of shares for the effects of the D, E,
F, G and H shares, assuming full vesting of all potentially dilutive shares. The number of these shares is disclosed in note 23.
There was no change in the diluted earnings per share, since the effect of all potentially dilutive shares outstanding was
anti-dilutive.
27. Related Party Transactions
The Directors’ interests in the ordinary share capital of the Company at the balance sheet date are detailed below:
£ per share
Ordinary Shares
2022
Ordinary Shares
2021
Number
Number
0.005
249,294,545
233,441,525
1
0.005
1
0.005
0.005
0.005
0.005
0.005
0.005
361
361
3,638,116
3,638,116
3,174
n/a
3,174
14,566,016
2,505,943
2,505,943
n/a
n/a
21,926
2,400,000
69,765
33,557
21,926
-
257,864,065
254,280,383
M J Moulding
M J Moulding
J A Gallemore
J A Gallemore
D P Murphy1
I McDonald
Z Byng-Thorne1
T Hall1
D Sanders
C Allen
213
In addition to the shareholdings noted above, the Directors had the following interests in vested Shares issued under
previous incentive arrangements at the balance sheet date. These shares carry no voting rights.
M J Moulding
M J Moulding
M J Moulding
M J Moulding
J A Gallemore
J A Gallemore
J A Gallemore
D P Murphy1
I McDonald
2022
2021
2022
2021
Date of award
Subscription/
exercise price
£
Subscription/
exercise price
£
Dec-19
Aug-20
Aug-20
Aug-20
Dec-19
Aug-20
Aug-20
Dec-19
Dec-19
0.23
0.33
0.28
0.26
0.23
0.33
0.28
0.23
0.23
0.23
0.33
0.28
0.26
0.23
0.33
0.28
0.23
0.23
Number
Number
43,641,266
43,641,266
20,197,808
20,197,808
7,733,792
7,733,792
-
-
185,476
185,476
2,666,963
2,666,963
4,000,537
4,000,537
n/a
185,476
370,953
185,476
78,611,318
78,982,271
1. D P Murphy, Z Byng-Thorne and T Hall stepped down from the Board during the year and were therefore not Directors at 31 December 2022.
The Group has not provided any interest free loans to the Directors in 2022. In previous years the Group provided £0.3m
of interest free loans to the Directors for them to subscribe for shares as part of the employee benefit scheme which
remain outstanding at the balance sheet date. Full details of the Directors’ shareholdings are detailed in the Directors’
Remuneration Report on page 144.
On 11 August 2021, 89,612,682 H Shares held by M J Moulding were paid up and converted into listed Ordinary Shares,
leading to a reduction in the unpaid share capital included within other receivables (note 15) of £30.5m.
The Group has in place an agreement on commercial terms with Moulding Capital Limited to provide property, facilities
and project management services to the entity and its subsidiaries. This agreement generated £269,017 (2021: £635,000) for
the Group recognised within administrative expenses.
Prior to the IPO which took place in September 2020, THG divested the Propco Group, an entity now wholly owned by the
Group’s CEO. The Propco Group owns property assets occupied and utilised by THG and its operating businesses.
The amounts recognised on the Group’s balance sheet in relation to the leases with Propco in the year are as follows:
Right-of- use asset
Lease liability
The amounts recognised on the Group’s statement of comprehensive income
in relation to the leases with Propco in the year are as follows:
Depreciation arising on right-of-use assets
Expense recognised in financing costs
Impairment arising on right-of-use-assets
Impairment arising on property plant and equipment
2022
£'000
159,000
178,694
2022
£'000
11,277
8,812
-
-
2021
£'000
218,279
262,797
2021
£'000
12,723
10,663
6,856
8,156
214
Annual Report 2022
The table below gives further detail around the leases in place:
Number of properties
Residual lease term date
divestment
FY22 rent £’000
9
1
12
7
29
0-4 years
6 years
12-14 years
18-24 years
962
1,652
3,285
9,923
15,822
The following table shows the amounts receivable from or payable to Propco which are outstanding at the balance sheet
date. These include balances in relation to lease agreements and where the Group has paid suppliers on behalf of the
Propco Group, or vice versa. Such situations arise due to Propco suppliers using legacy details to submit invoices or where
payments are made on behalf of THG by Propco for property related costs rechargeable to THG as a tenant per lease.
Included within the amounts owed to Moulding Capital Limited is an amount of £10.5m in relation to fixtures and fittings
that had been paid by Propco on behalf of THG in respect of a fitout of one of the properties leased by THG. An extensive
review was completed by THG to ensure that all assets were in use by THG. In addition, legal specialists and property
specialists were engaged to ensure that this transaction was completed on an arms-length basis. Following completion
of this work and after approval by the Related Parties Committee the amount was recognised as an amount owed to
related parties.
Related party
Amounts owed by
related parties
Amounts owed to
related parties
Amounts owed by
related parties
Amounts owed to
related parties
2022
2021
£’000
£’000
£’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Aghoco 1442 Ltd
Allenby Square Ltd
MCL Alpha PropCo Ltd
MCL Omega PropCo Ltd
MCL Icon Unit 3 PropCo S.à r.l.
MCL Gadbrook PropCo Ltd
MCL Icon Unit 4 PropCo Ltd
MCL PV PropCo Ltd
MCL A&A PropCo Ltd
MCL GJS PropCo Ltd
MCL HCC PropCo Ltd
MCL KS PropCo Ltd
Moulding Capital Limited
MCL Wroclaw sp. Z.o.o
MCL ICON S.à r.l
MCL Icon Unit 2 PropCo Limited
215
100
190
161
-
296
242
217
45
241
195
285
225
10,454
-
1,101
953
14,705
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
£’000
217
532
192
1,243
296
242
217
-
241
465
355
225
47
645
1,101
953
6,971
28. Subsidiary undertakings
These consolidated financial statements include the results of all subsidiaries owned by THG PLC as listed in the table
below. Some of these subsidiaries, which are listed below, have taken the exemption from an audit for the year ended
31 December 2022 permitted by s479A of Companies Act 2006. In order to allow these subsidiaries to take the audit
exemption, the parent company THG PLC has given a statutory guarantee, in line with s479C of Companies Act 2006.
At the balance sheet date, the following subsidiaries were controlled by the Group (a company incorporated in England
and Wales). All investments are 100% owned by THG PLC either directly or indirectly.
Subsidiary
Registered office
Country of
incorporation
Nature of business
The Hut.com Limited
The Hut Platform Limited
The Hut Holdings Limited
The Hut.com (Trading) Limited
Cend Limited
Guco Internet Supplies Limited
Iwantoneofthose Limited
The Hut Entertainment SL
Ensco 818 Limited
Mankind Holdings Limited
Mankind Direct Limited
Moo Limited
Lookfantastic Group Limited
Lookfantastic.com Ltd
Lookfantastic Franchising Limited
Lookfantastic London Limited
Lookfantastic Salons Limited
Exante Diet Limited
Bike Kit Limited
CNP Professional Holdings Limited
MyVitamins Limited
HQ Hair Limited
Cend International Limited
THGPP LLC
THG International LLC
Mama Mio Limited
Mama Mio Distribution Limited
1
1
1
2
1
3
3
14
1
3
1
1
1
1
1
1
1
1
1
3
1
3
1
4
4
1
1
England and Wales
Online retailing
England and Wales
Provision of website development services
England and Wales
Dormant
Jersey
Online retailing
England and Wales
Holding company
Guernsey
Guernsey
Spain
Holding company
Holding company
Dormant
England and Wales
Holding company
Guernsey
Dormant
England and Wales
Procurement company
England and Wales
Online advertising
England and Wales
Holding company
England and Wales
Online retailing
England and Wales
Franchising and consultancy services
England and Wales
Dormant
England and Wales
Hairdressing salon
England and Wales
Dormant
England and Wales
Dormant
Guernsey
Procurement company
England and Wales
Dormant
Guernsey
Holding company
England and Wales
Online retailing
USA
USA
Holding company
Warehouse and distribution
England and Wales
Online retailing
England and Wales
Dormant
Mama Mio US Inc.
30
USA
Online retailing
216
Annual Report 2022 Hale Country Club Limited
Gadbrook Limited
THG International Limited
The Hut Group International
(Shanghai) Co Limited
PC Beauty Inc.
Ideal Shape LLC
Performance Supplements LLC
Salu Australia PTY Limited
Skincarestore Australia PTY Limited
Salu Beauty Inc.
UK-2 Limited
Another.com Limited
Virtual Internet Holdings Limited
Hosting Services Inc.
UK2 Ukraine LLC
Virtual Internet (UK) Limited
The Hut.com (Poland) sp. z.o.o.
RY.com.au Pty Limited
Media Ark Limited
THG Studios Limited (previously
Hangar Seven Limited)
H7P Portugal Unipessoal LDA
Illamasqua (Holdings) Limited
Illamasqua Limited
Beauty Box Beteiligungen GmbH
Beauty Trend Holding GmbH
Beauty Trend GmbH
Jade 1150. GmbH
Beauty Trend S.A.S France
GlossyBox Sweden Holding UG
GlossyBox Sweden AB
GlossyBox United Kingdom Holding GmbH
Beauty Trend UK Limited
VRB GmbH & Co. B-149 KG
Beauty Trend USA Inc.
217
1
1
1
15
4
31
31
20
20
4
1
1
1
5
9
1
10
20
1
1
16
1
1
22
22
22
22
8
22
33
22
1
22
11
England and Wales
Retail and leisure company
England and Wales
Holding company
England and Wales
Marketing company
China
USA
USA
USA
Australia
Australia
USA
License holding company
Holding company
Marketing company
Marketing company
Holding company
Online retailing
Online retailing
England and Wales
Webhosting
England and Wales
Webhosting
England and Wales
Holding company
USA
Ukraine
Webhosting
Webhosting
England and Wales
Webhosting
Poland
Australia
Warehouse and distribution
Online retailing
England and Wales
Visual content producer
England and Wales
Visual content producer
Portugal
Visual content producer
England and Wales
Holding company
England and Wales
Online retailing
Germany
Germany
Germany
Germany
France
Germany
Sweden
Germany
Holding company
Online retailing
Online retailing
Holding company
Online retailing
Holding company
Online retailing
Holding company
England and Wales
Online retailing
Germany
USA
Holding company
Online retailing
Notes to the consolidated financial statements (continued)
EI Spa Holdings (UK) Limited
ESPA International (UK) Limited
Primavera Aromatherapy Limited
ESPA International (US) Inc.
ESPA International FZE
Make Money Limited
M Beauty Limited
Language Connect International Ltd
Language Connect, Inc.
1
1
1
6
17
1
1
1
7
England and Wales
Holding company
England and Wales
Online retailing
England and Wales
Manufacturing
USA
UAE
Online retailing
Online retailing
England and Wales
Holding company
England and Wales
Online retailing
England and Wales
Translation and interpretation
USA
Translation and interpretation
THG Ingenuity Singapore Pte. Limited
34
Singapore
Translation and interpretation
Acheson & Acheson Limited
1010 Products Limited
Ameliorate Skincare Limited
Eddie Rockers Limited
Great John Street Hotel Limited
King Street Investments Limited
THG Trustee Limited1
THG Nutrition US Inc. (previously MP, Inc.)
Myprotein Japan K.K.
Colorist Christophe Robin S.A.S.
Colorist Christophe Robin US, Inc
THG General Trading LLC
David Berryman Ltd
David Berryman Holdings Limited
Fair Juice Limited
Claremont Ingredients Ltd
THG 100 KING STREET LIMITED
The Hut Group Limited
THG Hangar Holdco Limited
THG Hangar Limited
THG Hangar 2 Limited
Lion/Wrinkle Holdings, Inc
Lion/Wrinkle Parent Corp
Lion/Wrinkle Intermediate LLC
1
1
1
1
1
1
1
1
12
8
11
25
1
1
1
1
1
1
1
1
1
1
1
1
England and Wales
Manufacturing
England and Wales
Dormant
England and Wales
Holding company
England and Wales
Holding company
England and Wales
Hotel operator
England and Wales
Hotel operator
England and Wales
Trustee of EBT
USA
Japan
France
USA
UAE
Holding company
Online retailing
Online retailing
Online retailing
Online retailing
England and Wales
Online retailing
England and Wales
Holding company
England and Wales
Dormant
England and Wales
Online retailing
England and Wales
Hotel operator
England and Wales
Dormant
England and Wales
Holding company
England and Wales
Holding company
England and Wales
Holding company
USA
USA
USA
Holding company
Holding company
Holding company
218
Annual Report 2022 N.V. Perricone LLC
Perricone MD Cosmeceuticals UK Limited
The Hut Group, S.L
THG Intermediate OpCo Limited
THG Operations Holdings Limited
THG Intermediate Holdings Limited1
THG Ingenuity Limited
THG Shelfco Limited
THG Beauty USA LLC (previously
Dermstore LLC)
Arrow Film Distributors Limited
The Engine House Media Services Limited
Indigo Environmental Limited
Indigo Environmental Holdings Limited
Indigo Polymers Limited
Three Counties Reclamation Limited
The Protein Lab (UK) Limited
Preston Plastics (Holdings) Limited
Preston Plastics Limited
Eco Credits Limited
Brighter Foods Limited
Bentley Laboratories Blocker Company
Bentley Laboratories LLC
Cult Beauty Limited
THG AUS Fulfilment PTY Limited
THG AUS PP PTY Limited
THG Eco Ltd
THG EU PP Limited
THG Ingenuity Germany GmbH
THG Beauty Limited
THG AUS Beauty PP PTY Limited
THG Beauty Singapore PTE Limited
THG Beauty PP EU Limited
THG Beauty PP US LLC
THG Experience Limited
219
13
1
14
1
1
1
1
1
27
1
1
1
1
1
1
1
1
1
1
1
11
19
1
20
20
1
21
29
1
20
23
21
18
1
USA
Online retailing
England and Wales
Online retailing
Spain
Online retailing
England and Wales
Holding company
England and Wales
Holding company
England and Wales
Holding company
England and Wales
Holding company
England and Wales
Holding company
USA
Online retailing
England and Wales
Motion picture distributor
England and Wales
Film processing
England and Wales
Environmental consulting activities
England and Wales
Holding company
England and Wales
Dormant
England and Wales
Recovery of sorted metals
England and Wales
Manufacturing
England and Wales
Holding company
England and Wales
Recovery of sorted metals
England and Wales
Environmental consulting activities
England and Wales
Manufacturing
USA
USA
Holding company
Online retailing
England and Wales
Online retailing
Australia
Australia
Fulfilment
Holding company
England and Wales
Holding company
Ireland
Germany
Holding company
Online retailing
England and Wales
Online retailing
Australia
Singapore
Ireland
USA
Holding company
Online retailing
Holding company
Holding company
England and Wales
Holding company
Notes to the consolidated financial statements (continued)
THG Luxury Limited
THG Luxury PP AUS PTY Limited
THG Luxury PP EU Limited
THG Luxury PP US LLC
THG Nutrition Limited
THG AUS Nutrition PP PTY Limited
THG AUS Nutrition PTY Limited
THG Nutrition India Private Limited
THG Nutrition Singapore PTE Limited
THG Nutrition Poland s.p.z.o.o
THG Nutrition PP EU Limited
THG Nutrition PP US LLC
THG OnDemand Limited
THG Beauty Europe GmbH (previously
THG OnDemand Germany GmbH)
THG OnDemand Netherlands B.V
THG OnDemand PP AUS PTY Limited
THG OnDemand PP EU Limited
THG OnDemand PP US LLC
THG OnDemand US LLC
THG Shared Services Limited
THG Shared Services AUS PTY Limited
THG Shared Services Poland sp.z.o.o
THG Shared Services US LLC
THG Beauty Trading LLC
THG Ingenuity General Trading LLC
THG Insurance Limited1
THG Icon CP PropCo Limited
1. Companies owned directly by THG PLC
1
20
21
18
1
20
20
24
23
10
21
18
1
22
26
20
21
18
18
1
20
10
18
28
29
3
1
England and Wales
Online retailing
Australia
Ireland
USA
Holding company
Holding company
Holding company
England and Wales
Online retailing
Australia
Australia
India
Holding company
Online retailing
Online retailing
Singapore
Online retailing
Poland
Ireland
USA
Online retailing
Holding company
Holding company
England and Wales
Online retailing
Germany
Online retailing
Netherlands
Online retailing
Australia
Ireland
USA
USA
Holding company
Holding company
Holding company
Online retailing
England and Wales
Shared Service centre
Australia
Poland
USA
UAE
UAE
Shared Service centre
Shared Service centre
Shared Service centre
Online retailing
Holding company
Guernsey
Holding company
England and Wales
Holding company
220
Annual Report 2022 Registered Offices:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Icon 1 7-9 Sunbank Lane, Ringway, Altrincham,
United Kingdom, WA15 0AF.
2nd Floor, Charter Place, 23/27 Seaton Place, St Helier, Jersey, JE1 1JY.
Sarnia House, Le Truchot, St Peter Port, Guernsey, GY1 4NA.
18.
300 Creekview Road, Suite 209, Newark, New Castle, 19711.
19.
111 Fieldcrest Avenue, Edison NJ 08837.
20. Azure Group Pty Level 10, 171 Clarence Street, Sydney, NSW 2000.
Corporation Trust Center, 1209 Orange Street,
Wilmington, DE 19801, USA.
517 West 100 North, Providence, UT 84332, USA.
100 SE 2nd Street, Suite 2000, Miami, FL 3313, USA.
Language Connect, Inc. 79 Madison Avenue,
Suite 205, New York, NY 10016, USA.
21. City Trust & Corporate Services Limited 1st Floor Liffey
Trust Centre, 117 -126 Sheriff Street Upper, Dublin 1.
22. Maximilianstrasse 5480538 Munich.
23.
100 Tras Street, #16-01 100AM, 079027, Singapore.
24.
203, 2nd Floor, Time Tower, Gurgaon Haryana, India.
25. Eternity Realty Building-ER 3 Deira Al Marrar Office: 041.
73 rue Sainte-Anne, Paris, France.
26. Barbara Strozzilaan 2011083 HN Amsterdam, The Netherlands.
79060, Ukraine, Lviv, Naukova str. 7D, office No. 305.
10.
ul. Magazynowa 1, 55-040 Magnice, Poland.
11.
06-101, WeWork 115 Broadway, New York, NY 10006, USA.
12. DLA Piper Tokyo, 2-1-1 Marunouchi, Chiyoda-ku,
Meiji Seimei Kan 7F, Tokyo, 100-0005, Japan.
27.
1960 E GRAND AVE 6TH FLOOR EL
SEGUNDO, CA 90245 United States.
28. New Mall Limited, Al Warsan First, 681-0, UAE.
29. Office no 08-106, 8th & 9th Floor, The Office 4, We Work, One
Central, Dubai World Trade Centre, Dubai, United Arab Emirates.
30.
555 California Street Ste 4925, San Francisco, CA 94104.
13.
600 Montgomery St Ste 2500, San Francisco, CA, 941111-2724, USA.
14. Monte Equinza 30 Bajo Izquierda 2810, Madrid, Spain.
15.
Room 753, Level 7, Building 2, No. 155, Fu Texi 1st
Road, China (Shanghai) Pilot Free Trade Zone.
31.
632 N 2000 W Ste 110, Lindon, UT 84042.
32.
7405 E Monte Cristo Ave, Scottsdale, AZ, 85260.
33. Drottninggatan 108113 60 Stockholm Sweden.
16.
Lote D, Área Empresarial de Marim, 8700-122 Olhão, Portugal.
34. Rawlinson & Hunter Singapore - 30 Cecil Street, #18-
02 & 03, Prudential Tower, Singapore 049712.
17.
Jebel Ali Free Zone, Dubai, UAE.
Notes to the consolidated financial statements (continued)
Subsidiary audit exemptions
The below subsidiaries have taken the exemption from an audit for the year ended 31 December 2022 permitted by s479A
of Companies Act 2006. In order to allow these subsidiaries to take the audit exemption, the parent company THG PLC has
given a statutory guarantee, in line with s479C of Companies Act 2006.
Name
Ensco 818 Ltd
Company
number
Name
7459909 UK-2 Ltd
Company
number
Name
Company
number
3550739 David Berryman Holdings Ltd
Lookfantastic Group Ltd
5381562 Virtual Internet (UK) Ltd
3203095 Claremont Ingredients Ltd
Illamasqua (Holdings) Ltd
6116121 Beauty Trend UK Ltd
7569585 David Berryman Ltd
El Spa Holdings (UK) Ltd
9317257
THG International Ltd
10523712
THG Hangar 2 Ltd
Make Money Ltd
5880897
Illamasqua Ltd
6301971
Perricone MD
Cosmeceuticals UK Ltd
Eddie Rockers Ltd
Eco Credits Ltd
3009737 Primavera Aromatherapy Ltd
2053064 Guco Internet Supplies Ltd
12933421 M Beauty Ltd
5850964
The Hut.com (Trading) Ltd
THG Intermediate Holdings Ltd
12526036
THG 100 King Street Ltd
12938227 HQ Hair Ltd
Lookfantastic.com Ltd
3519634 Cend International Ltd
8651475
THG Studios Limited (previously
Hangar Seven Limited)
Mankind Direct Ltd
4112104
ESPA International (UK) Ltd
2742156
Lookfantastic Franchising Ltd
Cend Ltd
The Hut Platform Ltd
Another.com Ltd
4067712
Language Connect International Ltd
7364250
Lookfantastic Salons Ltd
6473891 Acheson & Acheson Ltd
2764368 Moo Ltd
3661600 King Street Investments Ltd
8242806 Mama Mio Ltd
THG Shared Services Ltd
13515579 Great John Street Hotel Ltd
7973960 Hale Country Club Ltd
THG Hangar Ltd
12699915
The Engine House Media Services Ltd
10597642
Indigo Environmental Ltd
Indigo Environmental Holdings Ltd
11738577
THG Hangar Holdco Ltd
12698636
Three Counties Reclamation Ltd
The Protein Lab (UK) Ltd
8491800 Preston Plastics Holdings Ltd
13265838 Preston Plastics Ltd
THG Nutrition Ltd
THG Ingenuity Ltd
13400484
THG Beauty Ltd
13400467
THG OnDemand Ltd
13414244
THG Luxury Ltd
13515580 THG Experience Ltd
The Hut.com Limited
5016010 Media Ark Limited
6127322 Arrow Film Distributors Limited
Iwantoneofthose.com Limited
52189 Ameliorate Skincare Limited
3427037 Brighter Foods Limited
CNP Professional Holdings Limited
53443
THG Trustee Limited
10511000 Cult Beauty Limited
Gadbrook Limited
9867117
THG Intermediate OpCo Limited
12297092
THG Eco Limited
Virtual Internet Holdings Limited
5943486
THG Shelfco Limited
13120197
THG Insurance Limited
THG Icon CP PropCo Limited
12940601
10392135
2817306
2185279
12746651
6471993
49249
87702
52888
6293681
5382066
6310534
5158225
5251791
6970110
10695826
3792922
3377914
13400489
13515614
2584648
8815259
6195011
13400476
2770512
The below subsidiaries have taken the exemption from an audit for the year ended 31 December 2022 permitted by s480 of
Companies Act 2006.
Name
Company
number
Name
Company
number
Name
Lookfantastic London Ltd
6338404
Exante Diet Ltd
7126424 Bike Kit Ltd
Mama Mio Distribution Ltd
7721655 Mankind Holdings Ltd
52666
The Hut Holdings Ltd
Fair Juice Ltd
Myvitamins Ltd
6494686
1010 Products Ltd
3402920
Indigo Polymers Ltd
8179216
The Hut Group Limited
12526836
Company
number
8317188
7002848
11526560
221
222
Annual Report 2022
29. Post balance sheet events
At the year end, certain loss-making categories and territories primarily within THG OnDemand were placed under
strategic review. Post year end, and following completion of the strategic review (further details on which are included in
the “Section 172 Statement Stakeholder Engagement” section), the Board approved the exit from THG OnDemand. In Q4,
the Board approved the exit of ProBikeKit. These operations will be fully exited throughout the course of 2023. The optimal
exit route remains under review. The result of this decision has led to an inventory provision totalling £25.5m, other costs of
£6.9m and impairment of £3.8m which have been recognised within cost of sales and administrative expenses respectively
and included within Adjusted Items (note 4). This has been concluded as an adjusting post balance sheet event.
On 28 February 2023, the sale completed in respect of one of the non-core freehold assets recorded within the assets held
for sale category (note 12.2). The sale generated cash proceeds of £5m which reflected the carrying value of the asset.
No other post balance sheet events have occurred.
Company only
financial statements
223
224
Annual Report 2022 Company statement of financial position as at 31 December 2022
Non-current assets
Investments
Current assets
Receivables
Cash
Payables: amounts falling due within one year
Net current assets
Total assets less current liabilities
Net assets
Capital and reserves
Called up share capital
Share premium
Merger reserve
Capital redemption reserve
Loss for the year
Retained earnings
Total shareholders’ funds
Note
4
5
6
7
2022
£’000
524,580
524,580
1,612,636
56,267
1,668,903
(8,710)
1,660,193
2,184,773
2,184,773
6,903
2,024,452
615
523
(22,560)
174,840
2,184,773
2021
£’000
508,846
508,846
1,406,262
282,278
1,688,540
(3,147)
1,685,393
2,194,239
2,194,239
6,684
2,022,311
615
523
(19,328)
183,434
2,194,239
The financial statements on pages 225-230 were approved by the Board of Directors on 17 April 2023 and were
signed on its behalf by:
Damian Sanders
Chief Financial Officer
Registered number: 06539496
225
Company statement of changes in equity for the year ended
31 December 2022
Ordinary
shares
£'000
Share
premium
£'000
Merger
reserve
£'000
Capital
Redemption Reserve
£'000
Retained
earnings
£'000
Total equity
£'000
Balance at 1 January 2021
6,061
1,287,171
615
523
183,434
1,477,804
Loss for the year
-
-
Issue of ordinary share capital
623
735,140
-
-
-
-
(19,328)
(19,328)
-
735,763
Balance at 31 December 2021
6,684
2,022,311
615
523
164,106
2,194,239
Balance at 1 January 2022
6,684
2,022,311
615
523
164,106
2,194,239
Loss for the year
-
-
Issue of ordinary share capital
219
2,141
Share-based payment
-
-
-
-
-
-
-
-
(22,560)
(22,560)
-
2,360
10,734
10,734
Balance at 31 December 2022
6,903
2,024,452
615
523
152,280
2,184,773
226
Annual Report 2022 Notes to the Company financial statements
d. Financial liabilities and equity
1. Accounting policies
The principal accounting policies have been applied in accordance with ‘Financial Reporting Standard 101 Reduced
Disclosure Framework’ (FRS 101) and are detailed below. The policies have been applied consistently throughout both the
current and preceding year.
a. Basis of preparation
The Company financial statements have been prepared in accordance with United Kingdom’s Generally Accepted
Accounting Practice, including Financial Reporting Standard 101 Reduced Disclosure Framework (‘FRS 101’), and in
accordance with the provisions of the Companies Act 2006. The Company has taken advantage of section 408 of the
Companies Act 2006 not to present the parent company profit and loss account. The loss for the financial year in the
financial statements of the Company is £22.6m (2021: £19.3m). The financial statements have been prepared on the
historical cost basis.
In accordance with FRS 101, the Company has taken advantage of the following disclosure exemptions:
•
Company cash flow statement and related notes
• Disclosures required by IFRS 2 Share-based payments
• Disclosures required by IFRS 7 Financial Instrument Disclosures
• Disclosure of related party transactions
There have been no new or amended accounting standards or interpretations adopted during the year that have had a
significant impact on the company’s financial statements.
There are no standards, interpretations or amendments to IFRS that have been issued but are not yet effective that are
expected to have a material impact on the Company’s financial statements.
b. Taxation and deferred taxation
Current tax including UK Corporation Tax is provided at amounts expected to be paid or recovered using
the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred taxation is provided in full on timing differences that result in an obligation at
the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates
expected to apply when they crystallise based on current tax rates and law.
Temporary differences arise from the inclusion of items of income and expenditure in taxation computations in periods
different from those in which they are included in the financial statements. Deferred tax assets are recognised to the extent
that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.
c. Financial instruments
Financial assets and financial liabilities are recognised on the Company’s balance sheet when
the Company becomes a party to the contractual provisions of the instrument.
The most significant financial asset relates to an intercompany debtor, representing funding
requirements within the Group. Management have considered all aspects of IFRS 9 with respect to
recognising the appropriate value of these financial instruments at the balance sheet date, including
credit risk, and have concluded that this has not adversely changed since initial recognition.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements
entered. An equity instrument is any contract that evidences a residual interest in the assets of the Company after
deducting all its liabilities.
e. Investments in subsidiaries
Investments in subsidiaries are held at cost, less any provision for impairment. Where equity settled share-based
payments are granted to the employees of subsidiary companies, the fair value of the award is treated as a capital
contribution by the Company and the investments in subsidiaries are adjusted to reflect this capital contribution.
f. Share-based payments
The Group operates share-based compensation plans, under which the Group receives services from employees
as consideration for equity instruments (options) of the Company. The fair value of the employee services received
in exchange for the grant of the equity instruments is recognised as an increase to investments in the statement of
comprehensive income. The total charge is recognised over the vesting period, which is the period over which all the
specified vesting conditions are to be satisfied. At the end of each reporting period, the Group revises its estimates of the
number of equity instruments that are expected to vest based on the non-market vesting conditions along with taking
account of any equity instruments that may have been cancelled or modified in the period. It recognises the impact of the
revision to original estimates, if any, in the statement of comprehensive income with a corresponding adjustment to equity.
Note 7 in the consolidated financial statements details the schemes in place.
g. Critical accounting judgements and key sources of estimation uncertainty
Critical accounting judgements
Impairment of investments
The carrying amounts of the Company’s investments are reviewed at each reporting date to determine whether there
is any indication of impairment in accordance with the accounting policy set out in note 1 of the consolidated financial
statements. The Company considers impairment of its investments in subsidiaries by estimating the recoverable amounts
of its investments. In performing this assessment, management have considered the cashflows at a group consolidated
level, consistent with the impairment review for the Group's goodwill, and concluded that the forecasts support the carrying
value of the company's investments. Note 11 in the consolidated financial statements details the assumptions used together
with an analysis of the sensitivity to changes in key assumptions.
Key sources of estimation uncertainty
Recoverability of intercompany debtors
The Company uses estimates to determine the recoverability of amounts due from its subsidiaries. Under IFRS 9, the
carrying amounts of receivables from other Group subsidiaries are required to be assessed for recoverability on a forward-
looking basis through the recognition of an expected credit loss (ECL) provision. This requires the estimation of expected
loss at default (ELD) and probability of default (PD) to compute the ECL, which is deemed to reflect the irrecoverability of
intercompany debtors.
In calculating the ECL, management elect to use a loss percentage which is in line with market practice in the UK and
EU. An assessment of the Groups credit rating is utilised as this is the most accurate and reflective probability of default,
specific to the THG entities.
227
228
Annual Report 2022
Notes to the Company financial statements (continued)
7. Share capital and reserves
2. Employee costs and numbers
The average number of employees during the year was 2 (2021: 2).
Short term employee benefits
Social security costs
Pension costs
2022
£'000
270
25
2
297
2021
£'000
50
3
-
53
3. Auditor remuneration
Amounts paid to the Company’s auditors are disclosed in note 5 of the Group’s consolidated financial statements.
4. Fixed asset investments
Fixed asset investments comprise investments in subsidiary undertakings.
At 1 January
Additions
At 31 December
5. Receivables
Trade and other receivables
Amounts owed from Group undertakings
Unpaid share capital
Corporation tax asset
Other taxation and social security
Prepayments and accrued income
2022
£'000
2021
£'000
508,846
508,846
15,734
-
524,580
508,846
2022
£'000
2,480
2021
£'000
596
1,575,903
1,373,336
26,919
4,741
1,229
1,362
27,026
4,687
379
238
1,612,634
1,406,262
Amounts owed by Group undertakings are unsecured, non-interest bearing and repayable on demand. The current amount includes amounts of £1,575.9m
(2021: £1,373.3m) due on demand but expected to be settled after 1 year.
At 31 December 2022, there were 160,809,675 fully vested, but partly paid and unlisted Shares (31 Dec 2021: 161,439,766). The average amount of unpaid share
capital per fully vested but partly-paid and unlisted Share is £0.17 (2021: £0.16) representing a receivable to the Group of £26.9m (2021: £27.0m). The movement
in the year is all due to certain fully vested but partly paid and unlisted Shares being paid-up and converted to Ordinary Shares.
6. Payables: amounts falling due within one year
Trade creditors
Accruals and deferred income
229
2022
£'000
1,900
6,810
8,710
2021
£'000
919
2,228
3,147
THG PLC is a public company limited by shares and incorporated in England and Wales. It has a standard listing on the
London Stock Exchange and is the holding company of the Group. The Company has ten classes of shares; Ordinary
Shares of £0.005 each, all of which are fully paid; D1 Shares of £0.005 each; D2 Shares of £1 each, all of which are fully paid;
E Shares of £0.005 each; F Shares of £0.005 each; G Shares of £0.005 each; H Shares of £0.005 each; the Special Share of
£1, which is fully paid up; Deferred 1 Shares of £0.005 each; and Deferred 2 Shares of £0.005 each. As at 31 December 2022,
the Company’s issued share capital comprised:
Class
2022 Number
Nominal value £ each
Ordinary Shares
D1 Shares
D2 Shares
E Shares
F Shares
G Shares
Special Share
Deferred 1 Shares
Deferred 2 Shares
1,265,377,243
56,082,651
17,741
48,995,797
27,122,287
17,494,614
1
313,257
21,563,860
1,436,967,451
0.005
0.005
1
0.005
0.005
0.005
1
0.005
0.005
During the financial year ending 31 December 2022 the following took place. The conversion of shares are in respect
of the employee share scheme:
(xxv)
(xxvi)
(xxvii)
(xxviii)
(xxix)
(xxx)
(xxxi)
34,454 Ordinary Shares were converted from 34,454 E Shares;
88,000 Ordinary Shares were converted from 88,000 E Shares;
22,953 Ordinary Shares were converted from 22,953 E Shares;
1,606 Ordinary Shares were converted from 1,606 E Shares;
6,399 Ordinary Shares were converted from 6,399 E Shares;
44,909 Ordinary Shares were converted from 21,144 E Shares, 8,000 F Shares and 15,765 G Shares;
71 D2 Shares were subdivided into 14,200 D2 shares of £0.005 each, 13,169 of which converted into 13,169 Ordinary Shares and 1,031 of which were
reclassified as Deferred 1 Shares;
(xxxii)
1,000 Ordinary Shares were converted from 1,000 E Shares;
(xxxiii)
15,530 Ordinary Shares were converted from 6,208 F Shares and 9,322 G Shares;
(xxxiv)
75,000 Ordinary Shares were converted from 75,000 G Shares;
(xxxv)
1,000 Ordinary Shares were converted from 1,000 E Shares;
12,000 Ordinary Shares were converted from 12,000 G Shares;
(xxxvi)
(xxxvii) 65,000 Ordinary Shares were converted from 65,000 E Shares;
(xxxviii) 24,806,893 Ordinary Shares were issued for a total consideration of £911,722 (note 7);
(xxxix)
(xl)
(xli)
(xlii)
(xliii)
(xliv)
(xlv)
(xlvi)
(xlvii)
(xlviii)
1,000 Ordinary Shares were converted from 1,000 E Shares;
77,175 Ordinary Shares were converted from 16,118 E Shares, 30,497 F Shares and 30,560 G Shares;
12,168 Ordinary Shares were converted from 4,193 F Shares and 7,975 G Shares;
19,074,902 Ordinary Shares were issued for a total consideration of £1,521,117 (note 7);
19,753 Ordinary Shares were converted from 10,572 F Shares and 9,181 G Shares;
17,529 Ordinary Shares were converted from 7,048 F Shares and 10,481 G Shares;
52,026 Ordinary Shares were converted from 8,068 E Shares, 17,620 F Shares and 26,338 G Shares;
26,292 Ordinary Shares were converted from 10,572 F Shares and 15,720 G Shares;
6,538 Ordinary Shares were converted from 2,643 F Shares and 3,895 G Shares; and
4,000 Ordinary Shares were converted from 4,000 E Shares.
8. Related party transactions
The Company has taken exemption under FRS 101 not to disclose transactions with wholly owned subsidiary companies.
230
Annual Report 2022
Glossary
Alternative performance measures (“APMs”)
The Group tracks a number of alternative performance measures in managing its business, which are not defined or
specified under the requirements of IFRS because they exclude amounts that are included in, or include amounts that are
excluded from, the most directly comparable measure calculated and presented in accordance with IFRS, or are calculated
using financial measures that are not calculated in accordance with IFRS.
The Group believes that these alternative performance measures, which are not considered to be a substitute for or
superior to IFRS measures, provide stakeholders with additional helpful information on the performance of the business.
These alternative performance measures are consistent with how the business performance is planned and reported within
the internal management reporting to the Board.
These alternative performance measures should be viewed as supplemental to, but not as a substitute for, measures
presented in the consolidated financial information relating to the Group, which are prepared in accordance with IFRS.
The Group believes that these alternative performance measures are useful indicators of its performance. However, they
may not be comparable with similarly-titled measures reported by other companies due to differences in the way they are
calculated. Profit-related APMs frequently exclude significant recurring business transactions (e.g., restructuring charges
and acquisition-related costs) that impact financial performance and cash flows.
The Audit Committee have reviewed the overall presentation of APMs to ensure that these are not given undue
prominence, challenged the nature and amount of adjusting items and evaluated the reconciliations used by management.
In determining whether an item should be presented as an allowable adjustment to IFRS measures, the Group considers
items which are significant either because of their size or their nature, and which are non-recurring. For an item to be
considered as an allowable adjustment to IFRS measures, it must initially meet at least one of the following criteria:
•
•
It is a significant item.
It has been directly incurred as a result of acquisition related restructuring and integration costs, transportation,
delivery or fulfilment costs in relation to Covid-19 or as part of the outcome of the strategic review or divisional
reorganisation.
•
It is unusual in nature or linked to a one-off agreement signed outside of the normal course of business.
Purpose
The Group uses APMs to improve the comparability of information between reporting periods, either by adjusting for
uncontrollable factors or special items which impact upon IFRS measures.
Their use is driven by characteristics particularly relevant to THG Group:
•
•
•
Adjustments to operating profit – the Group has a significant non-current asset base and consequently incurs a high
proportion of depreciation and amortisation. APMs are used to provide adjusted measures for users of the financial
statements to evaluate our operating performance.
Acquisition related activity - the Group is in a growth phase in its lifecycle and has made several acquisitions in the
previous reporting periods. Consequently, a high volume of transaction, restructuring and financing costs are incurred
within the Group which do not reflect its underlying business. APMs are used to provide an adjusted measure for users
of the financial statements to consider performance after such items.
In 2022 following the strategic review, some non-core categories and territories were discontinued. These areas do not
meet the definition of a component to be disclosed under IFRS 5; Assets held for sale and discontinued operations as
a discontinued operation on the face of the consolidated income statement and as such has been recognised as an
APM in 2022 to provided information to the users of the financial statements of the ongoing operations.
231
232
Annual Report 2022 APM
Closest
equivalent
IFRS measure
Adjustments to reconcile to
primary statements
Purpose
APM
Closest
equivalent
IFRS measure
Adjustments to reconcile to
primary statements
Purpose
Adjusted Gross profit
Gross profit
Adjusted distribution
costs
Distribution
costs
Adjusted
administrative
expenses
Administrative
expenses
Adjusted EBITDA
Operating
profit
• Depreciation
• Amortisation
See the Chief Financial
Officer review footnote 1
for a reconciliation.
• Adjusted items
• Depreciation and
amortisation
See the Chief Financial
Officer review footnote 1
for a reconciliation.
• Adjusted items
• Depreciation and
amortisation
• SaaS costs arising from
change in accounting policy
• Share-based payments
See the Chief Financial
Officer review footnote 1
for a reconciliation.
• Adjusted items
• Depreciation and
amortisation
• Share-based payments
See the Chief Financial Officer
review for a reconciliation.
To show gross profit before depreciation and
amortisation charged due to its nature to aid
comparability.
To show distribution costs before adjusted items
and depreciation and amortisation charged due
to their nature to aid comparability.
To show administrative expenses before adjusted
items and depreciation and amortisation charged
due to their nature to aid comparability.
EBITDA is a useful measure for investors
because it is a measure closely tracked by
management to evaluate THGs operating
performance and to make financial, strategic and
operating decisions and may help investors to
understand and evaluate, in the same manner
as management, the underlying trends in
operational performance on a comparable basis
year on year.
Share-based payment costs are added back,
following the launch of the share-based payment
scheme in the year and management consider
these to be outside of the underlying day-to-
day operations. Given the material size of these
charges they are removed from underlying
Adjusted EBITDA.
Adjusted EBITDA
(continuing)
Operating
profit
Net (debt) / cash
before lease
liabilities
Cash
Net debt
Cash
•
•
•
•
•
Adjusted items
Depreciation and
amortisation
Share-based payments
SaaS costs arising from
change in accounting
policy
EBITDA from discontinued
categories
See the Chief Financial Officer
review for a reconciliation.
•
•
•
Loans and other
borrowings
Foreign exchange
(Retranslate debt balance
at swap rate where hedged
by foreign exchange
derivatives)
Lease liabilities
See the Chief Financial Officer
review for a reconciliation.
•
•
Loans and other
borrowings
Foreign exchange
(Retranslate debt balance
at swap rate where hedged
by foreign exchange
derivatives)
See the Chief Financial Officer
review for a reconciliation.
EBITDA is a useful measure for investors
because it is a measure closely tracked by
management to evaluate THGs operating
performance and to make financial, strategic and
operating decisions and may help investors to
understand and evaluate, in the same manner
as management, the underlying trends in
operational performance on a comparable basis
year on year.
In 2022 an additional measure has been
recognised to show the impact of the operations
that will continue in 2023.
To show the cash balance after the deduction
of the loans and other borrowings balances
but before lease liabilities are deducted and
after retranslation of debt balance at swap rate.
This measure is tracked by management when
reviewing liquidity and the indebtedness of the
Group which is then used to drive any strategic
or acquisition related decisions.
To show the cash balance after the deduction
of the loans and other borrowings balances and
after retranslation of debt balance at swap rate.
This measure is tracked by management when
reviewing liquidity and the indebtedness of the
Group which is then used to drive any strategic
or acquisition related decisions.
233
234
Annual Report 2022 The definitions set out below apply throughout this document, unless the context requires otherwise.
2021 Annual Report
means the Annual Report and Accounts of the Company in respect of the financial year ending 31 December 2021
2022 AGM
means the annual general meeting of the Company held on 10 June 2022
2030 Sustainability Strategy
means the Group’s Sustainability Strategy, THG x Planet Earth, for a better, sustainable future with targets centred
around three key priorities: (i) protecting climate and nature; (ii) strengthening our supply chain and circularity;
and (iii) empowering people and communities
Active Customers
means customers who have purchased at least once in the financial year ending 31 December 2022
Adjusted EBITDA
means the non-GAAP measure which is defined as Earnings Before Interest, Taxes, Depreciation, Amortisation,
share-based payments, SaaS change in accounting policy and adjusting items as detailed in note 4 of the
financial statements contained within this Annual Report
Adjusted EBITDA (continuing)
Admission
AGM
Annual Report
means the non-GAAP measure which is defined as Earnings Before Interest, Taxes, Depreciation, Amortisation,
share-based payments, SaaS change in accounting policy, adjusting items and removal of the EBITDA from those
operations within the Group that are no longer continuing
means the admission of the Ordinary Shares to both the standard listing segment of the Official List of the FCA
and the London Stock Exchange’s main market for listed securities, which took place on or around 16 September
2020
means the annual general meeting of the Company that will be held on 21 June 2023
means this Annual Report and Accounts of the Company in respect of the financial year ending 31 December
2022
API
means Application Programming Interface
Articles of Association
means the Articles of Association of the Company, as adopted by special resolution on 9 September 2020
Autostore
B2B
means AutoStore AS, a warehouse robotics company
means business to business
Bentley Laboratories
means Bentley Laboratories LLC, an innovative developer and manufacturer of prestige skincare and haircare
products that was acquired by THG on 15 June 2021
Board
means the board of directors of the Company
Board Committees
means the Company’s Board-constituted committees comprising the Audit Committee, the Risk Committee,
the Remuneration Committee, the Nomination Committee, the Related Party Committee and the Sustainability
Committee
Brexit
means the UK’s decision to leave the European Union following the referendum on 23 June 2016
Brighter Foods
means Brighter Foods Limited, a specialist developer and manufacturer of snack bars that was acquired by THG
on 11 May 2021
Carbon Neutrality
means achieving a net-zero release of greenhouse gas emissions (including carbon dioxide) into the atmosphere
Chair or Independent Chair
means Charles Allen, Lord Allen of Kensington, CBE, independent non-executive chair of the Company, appointed
on 22 March 2022
Chief Executive Officer or CEO
means Matthew Moulding, the Company’s Chief Executive Officer and co-founder
Chief Financial Officer or CFO
means Damian Sanders, the Company’s Chief Financial Officer
Chief Operating Officer or COO
means John Gallemore, the Company’s Chief Operating Officer and co-founder
Code
means The UK Corporate Governance Code (July 2018), published by the FRC
Companies Act
means the Companies Act 2006 (as amended from time to time)
Company
means THG PLC, a public limited company incorporated in England and Wales with registered number 06539496,
whose registered office is at Icon 1, 7-9 Sunbank Lane, Ringway, Altrincham, United Kingdom, WA15 0AF
Company Secretary
means James Pochin, the Company Secretary of THG PLC
Constant currency
means without taking into account fluctuations in the exchange rate; therefore showing the figures as if the
exchange rate remained constant
Covid-19
CRM
Cult Beauty
CX
D&I
D1 Shares
D2 Shares
D2C
Deferred 1 Shares
Deferred 2 Shares
Dermstore
Directors
means the disease caused by Severe Acute Respiratory Syndrome Coronavirus 2, responsible for the global
pandemic that has impacted the Group’s operations
means Customer Relationship Management
means Cult Beauty Limited, the UK-based online beauty retailer of prestige and emerging independent brands
that was acquired by THG on 3 August 2021
means customer experience
means diversity and inclusion
means the D ordinary shares of £0.005 each in the capital of the Company, having the rights and being subject to
the restrictions set out in the Articles of Association
means the D ordinary shares of £1.00 each in the capital of the Company, having the rights and being subject to
the restrictions set out in the Articles of Association
means direct to customer
means the deferred 1 shares of £0.005 each in the capital of the Company, having the rights and being subject to
the restrictions set out in the Articles of Association
means the deferred 2 shares of £0.005 each in the capital of the Company, having the rights and being subject to
the restrictions set out in the Articles of Association
means Dermstore LLC, the pure play online prestige skincare business that was acquired by THG on 2 February
2021
means the directors of the Company from time to time and “Director” means any one of them
Disclosure Guidance and
Transparency Rules or DTRs
means the disclosure guidance and transparency rules made by the FCA under Part VI of the Financial Services
and Markets Act 2000 (as amended from time to time)
Division
means business units within the Group. The Group has six divisions, THG Beauty, THG Nutrition, THG Ingenuity,
THG OnDemand, THG Luxury and THG Experience.
Divisional Reorganisation Committee
EBITDA
EBT
eCRM
means the committee, formerly named the Separation Committee, established to oversee the co-ordination,
delivery and execution of the reorganisation of the THG corporate structure, specifically regarding the formation
of six sub-groups relating to THG Beauty, THG Nutrition, THG Luxury, THG OnDemand, THG Ingenuity and THG
Experience
means the non-GAAP measure which is defined as Earnings Before Interest, Taxes, Depreciation and
Amortisation
means earnings before tax
means electronic customer relationship management
Employee Incentive Plan
means the employee incentive plan which was put in place during the 2022 reporting period and under which
Ordinary Share awards will be made to certain key employees below the level of the Executive Leadership Team
ERM
ESG
EU
E Shares
means Enterprise Risk Management
means environmental, social and corporate governance factors which are non-financial and are used in assessing
the sustainability and societal impact of the Company and its value chain
means the European Union
means the E ordinary shares of £0.005 each in the capital of the Company, having the rights and being subject to
the restrictions set out in the Articles of Association
Executive Leadership Team
means, collectively, those individuals holding executive management positions within the Company
Executive Directors
means the executive directors of the Company from time to time, being the Chief Executive Officer, the Chief
Financial Officer and the Chief Operating Officer at the date of this Annual Report, and “Executive Director”
means any one of them
EY or External Auditor
means Ernst & Young LLP, the Group’s statutory auditor and adviser in respect of non-audit services
FCA
FDA
FIR/ST
FMCG
FRC
means the Financial Conduct Authority
means the Food and Drug Administration, a US federal agency of the Department of Health and Human Services
means fulfilment, inventory, retrieval and storage technology
means fast moving consumer goods
means the Financial Reporting Council
235
236
Annual Report 2022
F Shares
GAAP
GDPR
means the F ordinary shares of £0.005 each in the capital of the Company, having the rights and being subject to
the restrictions set out in the Articles of Association
means Generally Accepted Accounting Principles
means the General Data Protection Regulation (EU) 2016/679
General Counsel
means James Pochin, the General Counsel of the Company
GHG
GMV
means greenhouse gases
means Gross Merchandise Value
Group or THG
means the Company and its subsidiaries and subsidiary undertakings from time to time
G Shares
H1 2023
H Shares
IAS
IFRS
IPO
KPI
means the G ordinary shares of £0.005 each in the capital of the Company, having the rights and being subject to
the restrictions set out in the Articles of Association
means the six-month period from 1 January 2023 to 30 June 2023
means the H ordinary shares of £0.005 each in the capital of the Company, having the rights and being subject to
the restrictions set out in the Articles of Association
means International Accounting Standards
means International Financial Reporting Standards
means the initial public offering of Ordinary Shares by the Company in September 2020
means key performance indicator
Listing Rules
means the Listing Rules made by the FCA under Part VI of the Financial Services and Markets Act 2000 (as
amended from time to time)
London Stock Exchange
means the London Stock Exchange PLC or its successor
LTIP
M&A
NEDs
means any long-term incentive plan operated by the Company from time to time
means mergers and acquisitions
means the Non-Executive Directors of the Company and “NED” means any one of them
Notice of Meeting
means the notice of AGM circulated to Shareholders on or around the date of posting of this Annual Report
NPD
means new product development
Ordinary Shares
means the voting ordinary shares of £0.005 each in the capital of the Company, having the rights and being
subject to the restrictions set out in the Articles of Association
Perricone
means Perricone MD, the US prestige skincare brand that was acquired by THG on 29 September 2020
Premium Listing
Propco Group
Propco Transaction
RCF
Regulations
Related Party Transaction
Remuneration Policy
means a listing where the issuer is required to comply with Chapter 6 of the Listing Rules and the other
requirements in the Listing Rules that are expressed to apply to securities with a premium listing
means Moulding Capital Limited (formerly Kingsmead Holdco Limited), a company incorporated in Guernsey
(registered no. 51762), whose registered office is at Sarnia House, Le Truchot, St Peter Port, Guernsey, GY1 1GR
(“Propco”), and its subsidiaries from time to time, which together hold certain property assets that are used or
occupied by THG under leases between the relevant Group company and the relevant subsidiaries of Propco
means the sale of the Propco Group prior to Admission to Moulding Group Limited (formerly FIC Holdings Ltd),
which is wholly owned by Matthew Moulding, the CEO
means revolving credit facility
means the Companies (Miscellaneous Reporting) Regulations 2018 (as amended from time to time)
means a transaction, arrangement or relationship to which the Company, or any of its subsidiaries, will be a
participant and where any related party has a direct or indirect interest
means the Shareholder-approved policy which sets out the remuneration arrangements for Directors (as
amended from time to time)
SaaS
means software as a service
SBTi
Section 172
SEDEX
means the Science Based Targets initiative, the global body enabling businesses to set emissions reduction
targets in line with climate science
means section 172 of the Companies Act which relates to the duty of a company’s directors to promote the
success of the company
means Supplier Ethical Data Exchange
Senior Management
means the Executive Leadership Team and its direct reports
Shareholder
means a holder of Ordinary Shares
Shares
SID
Softbank
Special Share
means together the Ordinary Shares, D1 Shares, D2 Shares, E Shares, F Shares, G Shares, H Shares, Deferred 1
Shares, Deferred 2 Shares and the Special Share or any, or a combination, of each as the context requires
means the Board’s senior independent NED, currently Dean Moore who was appointed on an interim basis on 24
January 2023
means SB Management Limited, a subsidiary of SoftBank Group Corp.
means the “special” share of £1.00 in the capital of the Company, having the rights and being subject to the
restrictions set out in the Articles of Association
Standard Listing
means a standard listing under Chapter 14 of the Listing Rules
TCFD
THG Beauty
THG Digital
THG Eco
means the Task Force on Climate-Related Financial Disclosures, a framework to help public companies and other
organizations more effectively disclose climate-related risks and opportunities through their existing reporting
processes
means a key division and market of the Company relating to beauty products, commerce and distribution
means the Company’s end-to-end digital brand services
means the Company’s sustainability solutions division
THG Experience
means a key division and market of the Company relating to influencer marketing and commerce
THG Ingenuity
means a platform created and used by the Company to achieve global e-commerce competitive advantage
THG Luxury
THG Media
means the luxury fashion retail division of the Company
means the Company's digital content, licensing, social and retail media proposition
THG Nutrition
means a key division and market of the Company relating to nutritional products, commerce and distribution
THG OnDemand
means the division offering personalisation and customisation to a range of consumers via online platforms
THG Procure
THG Studios
means our internally developed procurement system
means a division of the Company which produces digital content
THG Technology
means a key division and market of the Company
THG Values
means the Company’s values, namely leadership, innovation, decisiveness, ambition and collaboration
WMS
YoY
means warehouse management systems
means year on year
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Annual Report 2022