THG : Annual Report 2023 Presentation

Annual Report

THG PLC

For the year ended: 31 December 2023

Company Number: 06539496

T H G N U T R I T I O N

T H G B E A U T Y

T H G I N G E N U I T Y

2023

Annual Report & Accounts 2023

Contents

Strategic Report
Chair's introduction	Page 3
Chief Executive Officer's review	Page 5
Our purpose, vision and values	Page 7
Our strategy	Page 9
THG Beauty	Page 19
THG Nutrition	Page 25
THG Ingenuity	Page 29
Chief Financial Officer's review	Page 35
Section 172 statement stakeholder engagement	Page 47
Non-financial and sustainability information	Page 55
Our people	Page 57
Sustainability	Page 63
Task Force on Climate-related Financial Disclosures	Page 69
Risk management and informed decision-making	Page 87
Directors' Report	Page 99
Governance
Corporate Governance Report	Page 107
Audit Committee Report	Page 123
Risk Committee Report	Page 129

Highlights

Who we are

THG PLC operates three distinct businesses in Beauty, Nutrition and Ingenuity, each scaled from the UK to hold global leading positions in their respective sectors.

Strategic progress

• Strategic Review leading to discontinuation of loss-making categories, underpinning profitability improvements
• THG Nutrition over-deliveredmedium-term margin targets and entered new strategic partnerships through development of offline strategy
• Prioritisation of higher margin sales and territories reflected in higher quality EBITDA
• Appointment of Sue Farr and Helen Jones to the Board of Directors, increasing independence

Financial performance

• Group adjusted EBITDA £114.1m, +78% YoY
• Free cash flow breakeven achieved
• Strong balance sheet, with c.£600m of cash and available facilities
• RCF refinanced to May 2026

Revenue

FY23			£2,045.4m
FY22			£2,239.2m
FY21			£2,179.9m

Adjusted EBITDA

FY23					£114.1m
FY22					£64.1m
FY21					£161.3m

Adjusted EBITDA margin

FY23					5.6%
FY22						2.9%
FY21
				7.4%

Reported operating loss

FY23					£185.4m
FY22					£495.6m
FY21					£137.5m

Nomination Committee Report	Page 133
Related Party Committee Report	Page 139
Sustainability Committee Report	Page 141
Directors' Remuneration Report	Page 143
Financial Statements	Page 167
Glossary	Page 229

Revenue by territory	Revenue by business
ROW 15%		THG Ingenuity
(FY22: 17%)
	£673.9m £154.1m external
		(FY22: £757.0m £159.5m external)
		THG Beauty
	UK 46%	£1,171.7m
US 18%	(FY22: £1,226.0m)
(FY22: 43%)
(FY22: 20%)
		THG Nutrition
Europe 21%		£657.9m
(FY22: 20%)		(FY22: £662.7m)

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S T R AT E G I C R E P O R T

G O V E R N A N C E

F I N A N C I A L S TAT E M E N T S

Chair's introduction

framework exists throughout the Group, and that the Board is appropriately structured to guide THG through the next stage of its governance plans. With reference to my mandate to broaden the independence and diversity of the Board, we were delighted to welcome two further independent NEDs, Sue Farr and Helen Jones during 2023, building upon the progress made with the appointments of Gillian Kent and Dean Moore in September 2022. With the appointment of Sue as SID, it is pleasing that one of our four senior Board positions is now held by a woman, although we recognise we need to progress further in this regard.

THG Ingenuity was also recognised in the influential Gartner Magic Quadrant™ for Digital Commerce, acknowledging its completeness of vision and ability to execute. We will continue to progress our technology roadmap and deepen partnerships over multiple services and territories.

Following completion of our expansionary investment in our global fulfilment infrastructure, we have transformed our approach to operations, optimising automation to reduce costs, create efficiencies and, in turn, support our path to positive cash generation.

Work has already begun to meet these targets and we have also replaced our Ethical Code of Conduct with our new THG Supply Chain Standards, which strengthens our approach with our supply chain.

As a business, we are committed to encouraging environmental and societal change both through our own operations and as a key partner for our stakeholder groups. This is supported 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.

Charles Allen,

Lord Allen of

Kensington CBE

Independent Chair

Introduction

Welcome to our 2023 Annual Report. We are delighted to report a strong set of results, in particular achieving our cash generation guidance alongside improved profitability on an adjusted EBITDA basis.

When I joined THG, I was given a clear mandate to refresh the Board and further strengthen governance, independence and diversity. As documented throughout this Annual Report, we have made significant progress, both in this regard and in working closely with Matthew Moulding to develop the Senior Management team and refine the Group's strategy.

As Chief Executive Officer, Matthew has set a clear strategy for the Group, supported by Senior Management, who continue to bring vast amounts of energy to execute this strategy and take

Indeed, we remain committed to further broadening diversity in line with the FCA's D&I targets (which are considered further in the Nomination Committee Report) and meeting the Group's own EDI targets, on which further information can be found within the Sustainability section of this Annual Report. The search to identify suitable candidates to enhance the composition of the Board will remain an ongoing focus throughout 2024, to ensure we have the appropriate balance of skills, knowledge, experience and diversity on the Board to oversee the successful execution of the Group's strategy, and support THG's ongoing PLC evolution. In addition, we note the need to ensure that a robust and diverse succession pipeline is in place throughout the organisation more generally.

On behalf of the Board, I would also like to thank Iain McDonald for his significant contribution to the Company over his many years in office and prior to stepping down from the Board at the end

of March. In particular, we have greatly valued his contribution to strengthening the Board composition, welcoming new NEDs and developing THG's strategy. Notably, when Iain stood down from the Board, we achieved an equal balance of independent and non-independent Directors (excluding myself), which rectified the previous departure from Code Provision 11.

Further information on the Board changes which took place during 2023 can be found within the Corporate Governance Report and the Nomination Committee Report.

People and diversity

Despite a challenging year for the UK jobs market, we continued to attract and retain top talent within THG during 2023. With a renewed focus on internal mobility, we provided support for 365 people to move into new roles within the Group, which has not only strengthened our internal talent pipeline, but helped to create a resilient and agile workforce for the future.

We also invested in our future talent, onboarding 104 graduates, 24 interns and 100 apprentices. THG Accelerator, our in-house training programme for graduates from a non-computer science background, continued to provide a pipeline of diverse technology talent.

ED&I remained high on our agenda, influencing our talent attraction strategy across all areas of the Group. We continued to improve our knowledge and understanding of accessibility and inclusion in the workplace, and entered a two-year strategic partnership with Tech She Can to bring more women into the technology industry.

We are proud of the changes which we have made over the past 12 months, and plan to make further investment in our people in 2024.

Outlook

As we turn to the year ahead, we are positive on the outlook for our markets and anticipate a return to revenue growth during the year. We will continue to execute our strategy, work deeply with our partners and be disciplined stewards of the balance sheet.

During 2024 we expect further progress on EBITDA initiatives as our momentum continues. The new financial year has started well, especially within THG Beauty, where we recently added Biossance to our prestige own-brand portfolio. We also expect further good progress on profit enhancement initiatives which we will balance with investment in demand generation.

THG is a modern and dynamic company in a traditional environment. We are building a business fit for the next decade and beyond, and the Board remains highly supportive of the strategic direction the CEO and Senior Management team are pursuing to create value for stakeholders.

Finally, I'd like to thank our 7,000 colleagues around the world for their commitment and dedication to all of our stakeholders during this period.

advantage of opportunities for growth.

At Group level, our financial targets are centred on sustainable growth, cash generation, strengthening the balance sheet and improving margins. Having reviewed and developed the strategy, we are focused on initiatives within each business that ultimately support our objectives as a Group.

In line with our vision to create and grow category-leading brands on a global scale, I continue to be impressed by the progress made by each of our three businesses, and, while external challenges remain prevalent, particularly inflation and higher interest rates affecting consumer confidence, we have achieved an impressive financial performance.

Board composition and management

As I discuss later in the Governance Report, the Company remains committed to ensuring that a robust governance

Strategy

Sustainable revenue growth is a common objective across our businesses, and their detailed strategic plans are reviewed regularly by the Board. During the year, we reviewed and exited categories that did not meet our returns criteria, while making substantial investments in areas where we are well-placed and see specific opportunities to accelerate growth.

In THG Beauty, we made decisions on the categories and markets to prioritise, with a product-led focus. This multi-year strategy has redeveloped our retail business and allowed us to build stronger relationships with our brand partners, particularly in the UK and US.

In THG Nutrition, we achieved our medium-term margin targets alongside evolving our brand model into new markets and categories through selective partnerships. We have an excellent platform from which to expand our position in health and wellness, supported by a refreshed brand and look to broaden appeal.

Sustainability

Our sustainability strategy continues to be embedded across our businesses, led by our Senior Management and our Sustainability team. Following a full GHG inventory in 2020, THG submitted its net-zero targets to the SBTi, which were successfully validated as follows:

• THG commits that 85% of its suppliers by spend, covering purchased goods and services and upstream transportation and distribution, will have science-based targets by 2027.
• THG commits to reducing absolute Scope 1 and 2 GHG emissions by 42% by 2030 from a 2020 base year.
• THG commits to reducing absolute Scope 1 and 2 GHG emissions by 97.7% by 2040 from a 2020 base year. THG also commits to reduce absolute Scope 3 emissions by 90% within the same timeframe.

Further information can be found within: Chief Financial Officer Review (see page 35)

Section 172 Statement Stakeholder Engagement (see page 47)

Our People (see page 57)

Sustainability (see page 63)

Corporate Governance Report (see page 107)

Nomination Committee Report (see page 133)

C H A I R ' S I N T R O D U C T I O N

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Chief Executive

Officer's review

		•	Across both our consumer businesses, our customer health
			remains robust with repeat purchase rates of above 80%.
		•	Ingenuity's pivot to larger, multi-service clients is gaining
			momentum, reflected in some key client wins and a strong
			pipeline. We were thrilled to be listed in the Gartner's Magic
			Quadrant™ for Digital Commerce, in recognition of our ability
			to provide an all-encompassing direct to consumer journey.
	Matthew Moulding	•	In line with our guidance, substantial growth in Group
	Executive Director		profitability, along with improved inventory efficiency, led to
	and Chief Executive Officer		the Group delivering £174m of operating cashflow1 in 2023.
Chief Executive Officer's statement	•	This strong operating cash performance allowed the Group
	to continue to make £128m of Capex investments in the year,
2023 was a year of material operational progress and execution		principally into the UK, while still delivering overall free cash2
	flow breakeven for the year.
for THG, as we continued to grow our category-leading, global	•	Following the Group's solid adjusted EBITDA and operating
brands through digital transformation, innovation and impactful
partnerships. It was certainly not without its headwinds, but the		cash performance, closing net leverage for FY 2023 was
Group responded proactively, and emerged stronger.		c.1.9x, compared to 2.8x for FY 2022. Continued positive
Following the challenging global environment in 2022, we		momentum into FY 2024 provides confidence of further
	degearing.
repositioned our three businesses to focus our resources onto	•	With the support of our long-term banking partners, we
margin recovery and a return to sustainable revenue growth.
Overall, the performance was highly encouraging, and although		extended our revolving credit facility until May 2026. Whilst
we have more work to do in 2024, I am confident we have the right		we haven't used this facility since IPO, it affords us continued
people, capabilities and expertise to make further progress.		significant financial flexibility during uncertain geo-political
•	We achieved a Group record EBITDA performance after		times.
•	As noted in the Chair's Statement, we were delighted to
	cash adjusting items and anticipate further progress towards
	our medium-term targets during 2024, in line with historical		welcome two further independent NEDs, Sue Farr and
	performance.		Helen Jones, as we expanded our independent Board, while
•	Our Beauty business displayed incredible resilience, despite		thanking Iain McDonald for the significant contribution he
	made to the Company over many years.
	the first half being affected by short-term global de-stocking	•	We celebrated our meritocratic culture in our Annual
	affecting manufacturing volumes. Our focus on orders that
	delivered immediate profitability over ones with a longer		Awards, awarding £150,000 equity to Newcomer of the
	payback, meant we fulfilled more orders closer to our global		Year, Employee of the Year, and Outstanding Contribution,
	distribution hubs, driving further economies of scale.		in addition to supporting many well-deserved promotions
			across the Group.

• THG Nutrition achieved an impressive performance, and

	with inflationary pressures easing, posted substantially higher •	Following the Group's strong performance, the Executive
	margin growth year on year. The early results from the major	Directors would have been eligible for a bonus opportunity
	Myprotein rebrand are also encouraging as we've taken steps	totalling in excess of £1m in 2023. It is likely that a material
	to further enhance the premium nature of the world's No.1	proportion of this would have been payable to me, however,
	online sports nutrition brand.	in line with each financial year since IPO, the Executive
•	These actions should strengthen partnership opportunities	Directors unanimously decided to waive their entitlement to a
2023 bonus. In recognition of this, the Group intends to make
	as we expand our licensing and offline strategy. The new	a charitable donation of £500,000 targeting homelessness
	branding also lays the groundwork for selective category	in Manchester. I also waived my £750k salary in return for
	expansion, supporting our plan of building Myprotein into a	the Group making a charitable donation to The Moulding
	truly global lifestyle brand.	Foundation.

1. Defined as cash generated from operations including a cash receipt of £11.2m from HMRC which was remitted to the Group, but physically cleared the bank on the first working day of 2024.
2. Free cash flow is defined as total cash flow for the group adjusting for debt (repayments) / proceeds and acquisitions cash flows and in respect of FY 2023 the

Business operational performance

As an authority in Beauty, we continue to attract, retain and develop our customer relationships, with our proposition refined and elevated by new technology and a best-in-class delivery service that enhances the customer experience.

Myprotein has evolved beyond sports and performance to broader health and wellness categories, expanding its addressable markets and catering for increased consumption occasions. Pivotal to this strategy has been creating ranges with prominent partners in distribution, grocery and chilled goods - expanding the reach of the brand into offline channels and, in turn, building awareness and engagement. Commodity challenges abated during the year and we were able to achieve significant profitability while undergoing an ambitious brand repositioning.

Our proprietary technology and operations platform, THG Ingenuity, is a multi-year development story, with our fulfilment and operational solutions business now winning clients in its own right, as the business accelerates the returns on investment in distribution capacity.

Finally we actively managed our portfolio through the exit of small legacy brands within Beauty and Nutrition, and through the sale of OnDemand and ProBikeKit delivering a cash return.

Financial performance

Much like the previous year, 2023 presented challenges for all businesses in the markets we operate in. Nevertheless, we are very pleased with how the Group has responded, making substantial progress towards the targets we communicated at the outset of the year.

We achieved revenue of £2bn, reflecting our efforts in executing our strategic review, as we repositioned several loss-making categories across the Group. This created strong momentum heading into 2024, and we expect to return to progressive revenue growth throughout the year.

We repositioned Beauty to materially improve profitability, with the business finishing the year in constant currency growth. In Nutrition, we set out to recapture the significant investment we made in margin during 2022, subsequently achieving

an EBITDA margin in excess of our medium-term guidance. Ingenuity continued to execute its strategic pivot towards higher value clients, with new client wins and expanded partnerships accelerating monthly recurring revenue throughout the year.

We made notable margin improvements, in part due to the Group's excellent operational performance. Distribution costs were lower year on year, through an optimised fulfilment network consisting of increased automation and an improved delivery offering. We will continue to increase automation in our major hubs to further offset lingering inflation and move towards our goal of around half of customer orders being touched by automation.

Operational leverage also supported improvements in profitability, achieving continuing adjusted EBITDA of £120m - ahead of our previous guidance.

Our business has nearly doubled in revenue since IPO, with our growth capex investment phase already paying back. Investment in future years will remain at comparatively modest levels, though still extending and enhancing our proposition and competitive advantage while the market growth opportunity remains significant.

Following our strong operating cash performance in the second half of the year and our recently extended Revolving Credit Facility, we have a healthy liquidity position with c. £600m in cash and undrawn facilities providing substantial liquidity and flexibility, to capitalise on growth opportunities.

People and purpose

2023 was a year of transformation for our people as we prioritised attracting top talent, as well as retaining and nurturing our existing teams. From introducing wraparound support for working families, to increasing compassionate leave, we made significant investment in our people, their wellbeing, and their long-term development at THG.

We launched our social impact strategy, THG in the Community; our plan for creating positive social change and making an impact in our local communities. The strategy is underpinned by three pillars - championing inclusion, disrupting inequality, and creating opportunities - and revolves around three key initiatives, all of which have been introduced to give our people an opportunity to get involved and give back.

All businesses are accountable for maintaining a focus on closing the emissions gap. THG is rising to this challenge by committing a greater number of resources to its sustainability agenda, ensuring compliance with the ever-increasing legislative demands and making progress on our 2030 Sustainability Strategy.

Outlook

We expect long-term channel shift across our consumer markets to continue, supported by a track-record of consistently taking market share, and a global, expanding, high-repeat customer base.

We remain confident of a return to 9% adjusted EBITDA margins in the medium-term, and progression into 2024 through:

• a return to revenue growth across the Group;
• operating leverage improvements across the fixed infrastructure, including automation; and
• further free cashflow progress.

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.

C H I E F E X E C U T I V E O F F I C E R ' S R E V I E W

5inclusion of a cash receipt of £11.2m from HMRC which was remitted to the Group in December 2023 but physically cleared the bank on the first working day of 2024. For presentation purposes, this is considered to be free cash flow as at 31 December 2023 as a result of the remittance advice received.

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G O V E R N A N C E

F I N A N C I A L S TAT E M E N T S

Our purpose

To make an impact through digital transformation, innovation and expertise.  

Our values

We're incredibly proud to celebrate our diverse workforce and the unique experiences, skills and qualities everyone brings to the table. But there are a few things we all have in common.

We live and breathe our values every single day.

Watch this videoto find out more about our influencer management platform, THG Society, that has been designed and developed in-house by our tech and marketing teams.

Collaboration

From creative development and branding, to set build and show production, our teams at THG Studios worked together to bring The Overlap to life.

Innovation

Innovation is at the heart of everything we do at THG. From the technology we build to the products we develop.

"We wanted to showcase THG's talent in every inch of the design including branding, carpentry, lighting design, build, set design, and set dressing. We also collaborated with some northern creatives and artists outside of THG to create a custom wall mural for the set. Collaboration was key in the overall

vision and mindset of the team"

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.  

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.

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. 

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 to go further, faster.

THG Awards

Tech	Sustainability

- Mike Scott,

Executive Creative

Director.

Leadership

We're passionate about creating leaders at all levels. That's why we give our early careers talent access to career-defining opportunities.

From creating global campaigns and organising brand events to presenting to senior stakeholders and building their professional networks, life at THG enables them to go further, faster.

O U R P U R P O S E , V

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.  

Our vision

To create and grow category-leading global brands on a global scale.

Prolific North Awards:	Environmental Finance: EMEA Circular
Large Tech Company of the Year	Economy Transition of the Year 2023
Status: Shortlisted	Status: Won
Sustainability	Ingenuity

Retail Week Awards -	Gartner Magic Quadrant™
The Responsible Retailer Award
Status: Shortlisted	Status: N/A

Creative

Creative

Prolific North Creative Awards:	The Drum Roses Awards:
Inspired Space	The Guru - MyProtein cyber campaign
Status: Won	Status: Won

I S I O N & V A L U E S

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Our strategy

Strategic priorities

Build category leadership	Make Ingenuity the partner
positions in beauty, health	of choice for commerce
and wellness	transformation and
	sustainability solutions

S T R AT E G I C R E P O R T

G O V E R N A N C E

F I N A N C I A L S TAT E M E N T S

Suppliers	Customers
and partners	and consumers
We promote open and	We enable brands to have direct
transparent working	relationships with consumers
practices and collaborate	by providing a high-quality retail
for mutual commercial	experience and establishing
success	a relationship of trust

Deliver engaging	Accelerate growth in core	Drive positive change
content and innovative	international territories,	with our stakeholders,
products to our global	leveraging our local	through an entrepreneurial,
customer base	infrastructure	values-led culture

Medium-term financial priorities

Shareholders

We create value for shareholders through a focus on sustainable growth, responsible capital allocation and balance sheet stewardship

Our

stakeholders

Our people

We aim to ensure THG is an inclusive and supportive environment with career development opportunities at all levels, focused on building the skills of tomorrow

Revenue	Return to historical
growth	adjusted EBITDA
	margin of c.9%

Free cash flow

generation

Strong balance

sheetMarket-share growth in key

territories

THG Ingenuity	Society and
clients	communities
We support clients	We aim to develop digital skills
on their digital	and tech talent, providing jobs
transformation journeys	within local communities to help	O
through the provision of	promote greater social mobility,	U R
technology, operational	whilst protecting the environments	S T
and marketing services	we operate in and source from	R AT
		E G Y

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The Group operates three distinct businesses: Beauty, Nutrition and Ingenuity, each holding global leading positions in their respective sectors.

THG Beauty

THG Beauty is a leading digital strategic player within the prestige beauty industry globally, combining its portfolio of prestige owned brands across skincare, haircare and cosmetics with the provision of a critical route to market for over 1,300 third-party beauty brands sold through its online retail sites, including Lookfantastic, Cult Beauty and Dermstore.

THG Beauty's stated ambition is to be the global digital partner of choice across the beauty industry, supporting the channel shift to online. This strategy is based upon four key pillars:

1. maintaining its position as the world's largest online pure-play prestige beauty retailer;
2. supporting global beauty brands in addressing the channel shift in marketing spend from offline to online;
3. developing a digitally-focused stable of prestige THG-owned brands, providing margin enhancement and differentiation;
4. providing innovation and product development services directly to the beauty industry.

S T R AT E G I C R E P O R T

G O V E R N A N C E

F I N A N C I A L S TAT E M E N T S

THG Nutrition

THG Nutrition comprises a family of digital-first health and wellness brands, including the world's largest online sports nutrition brand Myprotein.

THG Nutrition is optimally positioned for continued global growth leveraging:

1. long-termtrend of consumers becoming increasingly health conscious, and consuming more nutritional products across a broadening range of categories;
2. proven ability to enter new markets and categories, localising the proposition whilst maintaining quality and operational excellence;
3. a global community of influencers, affiliates and social media followers driving direct traffic and brand awareness, in addition to its partnerships with major brands;
4. proprietary customer insights from direct to consumer engagement, supporting new product development and innovation through its vertically integrated manufacturing capabilities.

THG Ingenuity

THG Ingenuity offers a complete digital commerce solution. Through its expertise in building direct to consumer brands, developing technology and operational solutions and use of deep data insights, it enables brands to sell online by providing technology, global fulfilment and digital performance marketing services.

Strategic priorities for the business remain focused on:

1. increasing the value from our existing customer base and investing in long-term new customer growth across primary verticals of FMCG, beauty and retail;
2. growing its presence within its target markets of UK, Europe and the US;
3. building technology and delivery partnerships that create indirect revenue channels and extended delivery capacity to help us grow;
4. developing new products and solutions and continuing innovation on the platform.

In 2021 the Board set out the Group's strategy to provide	Since setting out this strategy, the Group has completed a
each business with its own growth and capital platform,	complex and lengthy divisional reorganisation, with each
through individual public market listings or partnerships, with	business now operating stand-alone. A strategic review of loss-
THG retaining significant majority ownership.	making categories and territories within the THG OnDemand
	business was also completed in 2023, leading to its full exit.

O U R S T R AT E G Y

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F I N A N C I A L S TAT E M E N T S

Our business model

THG is a leading vertically integrated, global ecommerce technology group and brand owner, powered by its proprietary technology platform, THG Ingenuity, through which it also provides end-to-end ecommerce solutions powering THG's brands offering alongside external, third-party brands to reach a global ecommerce consumer base.

THG operates three distinct businesses THG Beauty, THG Nutrition and THG Ingenuity, each operating in resilient, growing markets. These businesses leverage the Group's specialisms: the development of a portfolio of leading consumer brands; and the acceleration of D2C growth for brands and retailers.

Our businesses

THG Beauty

Comprising the #1 online pure-play prestige beauty retailer Lookfantastic, in addition to other popular online prestige beauty retailers including Cult Beauty and Dermstore. In total, THG Beauty offer more than 1,300 premium brands across the skincare, haircare, cosmetics, and fragrance categories globally with leading positions in the UK, US, and Europe. THG Beauty represents a critical route-to-market for beauty brands seeking to grow, innovate and connect with global audiences.

Additionally, THG Beauty owns nine prestige brands retailed through THG's online multi-brand sites as well as direct

to consumer websites, subscription boxes, and third-party channels. These brands are primarily skincare, haircare and cosmetics.

Finally, THG Beauty manufacturing provides a vertically integrated model for both our own and external prestige brands. THG Beauty is informed by market and brand trend insights from its global consumer base to support brand partners with their new product development capabilities while its in-house product development and manufacturing capabilities enables independent brands to scale.

Supporting the online and digital offering is the strategic advance into international and retail markets through offline partnerships and licensing agreements, further scaling and diversifying the global portfolio.

In addition, THG Nutrition boasts its own vertically integrated manufacturing capabilities, driving product development and production, shortening timelines to market and enabling the business to address consumer and market trends ahead of its competitors, driving higher levels of cross-category purchasing and brand awareness globally.

THG Ingenuity

Proprietary end-to-end ecommerce platform that powers digital experience and retail for CPG, 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 ecommerce technology and physical infrastructure.

As well as being a third-party ecommerce solution, THG Ingenuity is the operational infrastructure and digital hub that supports THG Beauty and THG Nutrition, delivering excellence throughout the supply chain and customer experience. THG Ingenuity 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 core competencies sit across:

Technology

Since inception nearly 20 years ago, the Group has continually invested in building its own ecommerce software specifically designed for the retail of consumer goods globally. Solutions include the Group's highly scalable enterprise platform that powers ecommerce 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.

Operations

Encompassing global fulfilment from a network of 13 warehouses in strategic locations across the world, courier management, customer services and sustainability solutions from carbon offsetting and consultancy to plastic recycling.

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.

R E V E N U E

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 through selling services to THG Beauty and THG Nutrition alongside third party external 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 licenses, and revenue share on Ingenuity websites.

C O S T S

Input costs relate primarily to raw materials for goods manufactured in-house (e.g. whey used in the manufacture of whey protein within THG Nutrition business) and finished goods purchased for resale (e.g. third party beauty products retailed by THG Beauty business). Distribution costs relate to the fulfilment and shipping of orders to customers. THG has delivered further efficiencies during the year through an innovative warehouse automation solution, despite the inflationary cost environment. Administrative costs relate primarily to marketing and people costs.

A D J U S T E D E B I T D A

THG's three businesses; THG Beauty, THG Nutrition and THG Ingenuity are profitable when considering adjusted EBITDA from continuing operations. The Group's medium- term adjusted EBITDA target remains c.9%, which is supported by its profit enhancement programme and in line with historical periods.

C A S H F L O W

The Group is targeting to be free cash flow positive from 2024 onwards, with the strategy to

O U R B U S

THG Nutrition

A group of digital-first brands spanning the nutrition and wellness space, led by the world's largest online sports nutrition brand, Myprotein. Its vertically integrated model allows for the business to expand and operate in complementary markets to sports nutrition such as vegan products, vitamins, bars, snacks and sportswear within the online and digital space in key markets including the UK and Asia.

Marketing

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.

reinvest for growth.

For further information please see: THG Beauty (see page 19), THG Nutrition (see page 25),

THG Ingenuity (see page 29), Chief Financial Officer Report (see page 35), Section 172 report (see page 47)

I N E S S M O D E L

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Annual Report & Accounts 2023

Our marketplace

The substantial and expanding addressable markets in which we operate in provide clear and compelling opportunities for growth across our businesses:

THG Beauty

S T R AT E G I C R E P O R T

G O V E R N A N C E

F I N A N C I A L S TAT E M E N T S

Market description

The global total addressable market for beauty and personal care was estimated to be £476 billion in 2023, growing 9.5% year on year. The premium segment, within which we primarily operate, is set to expand at a CAGR of 6.7% between 2023 - 2027 and anticipated to be valued at £136.6 billion in 2023.1

One of our key markets, the US, is leading the way in terms of beauty ecommerce penetration with the highest level at c.30%, in line with its overall online retail penetration rate. UK online spending has also been steadily growing throughout 2023, with online penetration remaining higher than pre- pandemic levels, set to accelerate throughout 2024.2

Products

THG Beauty comprises leading multi-retail sites, a portfolio of prestige owned brands and manufacturing capabilities across multiple categories within the beauty and personal care market, with leadership positions in key markets, the UK and US.

Our multi-retail sites Lookfantastic, Cult Beauty and Dermstore provide a critical route to market for over 1,300 brands across haircare, skincare, cosmetics, body care and fragrance.

Our vertically integrated owned brand proposition is supported by manufacturing capabilities in the UK and US, led by flagship skincare brands Perricone MD and ESPA. These brands aid in driving new product development as well as product discovery through partnership opportunities outside of the traditional beauty market.

Utilising our expansive proposition, THG Beauty seeks to use its digital expertise and innovation to deliver best-in-class curation and maximise the beauty customer experience, encouraging the channel shift from offline to online.

Key trends

The online global beauty and personal care market continues to grow, supported by increases in online penetration across the world and advancements in technology, enabling the in- store customer experience to be emulated online.

Despite wallet pressures, beauty spending remains robust as consumers pull back from purchasing in higher-price, prestige markets such as clothing and accessories. Relief in inflation rates, sequential increases in promotional activity and strong employment markets are likely to contribute to increased beauty spending expectations in the near to medium-term.3

Premium beauty remains a key trend within the global beauty market, growing 7.7% year on year in 2023, compared with the overall beauty and personal care market. As consumers become increasingly focused on product efficacy and maximising value, prestige beauty is becoming increasingly attractive. With increased competition in beauty, premiumisation unlocks value and opportunity within the market as legacy brands begin to lose market share to prestige, upcoming brands with loyal followings.

Our position

Our competitive advantage comes from the synergy of our entire beauty proposition. Through our retail sites and owned- beauty brands, we can forge both strong brand partner and customer relationships, supported by our global network of capabilities that allow access to multiple markets, new product development, and product discovery, underpinning our leading positions in key territories, the UK and US. The insights gained from our customers help to drive innovation and brand curation, particularly for emerging niche and independent brands.

The regime-based nature of our key categories, skincare and haircare, also offer up a competitive advantage as we are able to use thought-leadership, education and personalisation to further engage with our global audiences. Repeat-purchases and low level of trend influence enable us to dictate new product development opportunities while capitalising on unlimited online shelf-space that traditional and outdated channels such as department stores cannot do.

Outlook

The global total addressable beauty and personal care market is estimated to grow to £636 billion by 2027, at a CAGR of 5.8% between 2023 - 2027.4

Online adoption within global beauty is set to follow suit, rising at a CAGR of 7.7% between 2024 - 20305. This represents the continued opportunity within the beauty ecommerce space.

Global retail online penetration is set to steadily grow from 26% in 2023 up to 31% in 2027, with our key markets, the UK and US having a significant higher ecommerce share at c.30% for 2023.6

O U R M A R K E T P L A C E

	1.	Source: Euromonitor.	4.	Source: Euromonitor.
15	2.	Source: Barclays Online Penetration in 2024 Report.	5.	Source: Grand Research View, Beauty and Personal Care Products Market Report 2030.	16
3.	Source: Canaccord Genuity US Equity Research, Industry Update, December 2023.	6.	Source: Barclays Online Penetration in 2024 Report.

Annual Report & Accounts 2023

S T R AT E G I C R E P O R T

G O V E R N A N C E

F I N A N C I A L S TAT E M E N T S

THG Nutrition

Market description

THG Nutrition's total addressable market, including the sports nutrition, vitamins, weight management products and sportswear categories, is estimated to amount to around £350 billion globally. THG Nutrition's main focus is on the sports nutrition market, which is estimated to amount to £23 billion in 2023. 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 and minerals, bars and 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 affected 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, ecommerce 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 purchase of products.

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, and the most internationally diverse.

THG Nutrition is therefore uniquely positioned to capitalise on this long-term shift towards ecommerce. 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, which 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.

THG Nutrition has also expanded into traditional retail channels in recent years, principally through convenience products developed in-house, such as bars and snacks, and through licensing partnerships that expand the brand into new product formats, such as frozen food ranges developed with Iceland.

Outlook

The total addressable market is expected to continue to grow, reaching approximately £35 billion by 20281, representing

a 9% CAGR (2023 to 2028). 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 purchasing and educating themselves on the category.

THG Ingenuity

Market description

THG Ingenuity offers a full service commerce solution for brands looking to scale their ecommerce operations through improved online performance and internationalisation.

A shifting labour market, higher-for-longer interest rates, slower consumer spending and increased costs of advertising represented ongoing pressures for businesses through 2023. At the same time, digital innovation continued its far-reaching impact across new markets, altering existing markets and challenging the status quo. As brands like Walmart and Amazon set the standards for customer experience online, providers that offer cheaper, faster and better will win out. The most dangerous decision a business can do in this context, is to take a conservative 'wait and see' approach.

THG Ingenuity's unique advantage in this market context is to move fast, think bold and be willing to pivot, finding new ways to interact with end customers, optimise operations and deliver long-term, sustainable value.

Products

Powering £2 billion online sales for THG's own brands, serving over 1,000 Ingenuity customers globally and supported by c.4,000 employees, Ingenuity's ecommerce toolkit comprising technology, operations and marketing solutions propel digital growth and new market entry:

1. Technology comprises a core commerce platform which enables brands to sell their products online across their owned brand site, social channels and marketplaces supported by the infrastructure required to run and maintain the platform
2. Fulfilment includes our global payment solutions, fulfilment capabilities and courier management services, regulatory, labelling, sustainability and our customer contact solution.
3. Marketing comprises services that are designed to build and grow brands in new markets, on a global and local scale: trading, marketing and data services, creative strategy, content production, translation and localisation, retail media and THG's content creator platform.

Key trends

In 2023, the global ecommerce market was worth $5.8tn, spurred by the growth in international shopping where globally 52% of online consumers ordered from both local and international websites and social commerce including live stream shopping on channels such as TikTok.¹ This was accompanied by a resurgence of enthusiasm about technology's potential to solve some of the world's most complex challenges with GenAI helping to catalyse progress in both business and society.

Our position

THG Ingenuity has an unrivalled ability to continuously innovate, optimise and drive efficiencies at pace through its vertical integration and full ownership of the end-to-end ecommerce experience. Our investment in GenAI has helped to overcome structurally higher cost pressures and streamline operational processes while automation in fulfilment has increased efficiency, throughput, and accelerated speed

of delivery to the end customer. This is just a small part of the c.15,000 platform releases deployed annually which are automatically available to all clients on the platform.

Outlook

Euromonitor expects global ecommerce growth to settle

at a 'new normal' growth rate of c.10% per annum from 2024- 2027. In 2023, growth was largely inflation driven through higher average order values rather than volumes, with analysts expecting a return to volume-based growth during 2024 across apparel, footwear, health and beauty and food and beverage.²

O U R M A R K E T P L A C E

17	1.	Source: Euromonitor.	1.	Source: Forbes, March 2024.	18
		2.	Source: Barclays Equity Research, January 2024.