Earnings Call: H1 2021

Sep 16, 2021

Quarterly report

Good morning, and welcome to THG Plc's 2021 Interim Results. We are delighted you could join us today as we reflect on exactly 1 year today since we joined the London Stock Exchange as a public company. A lot has happened over those 12 months. The theme of today's presentation is scale, capability and collaboration. At THG. We have a passion for driving growth at a global level for our partners, and these themes will be relevant as I'm joined by the executive team who will share a deeper insight into their divisions. The pandemic continued to impact daily lives during the first half of twenty twenty one. And as a global business, we have become accustomed to operating with various degrees of restrictions and reopenings since March 2020. With this in mind, the strong financial performance delivered across the group with record levels of revenue, gross profit and EBITDA is even more meaningful. In terms of our trading statement, you will see that group revenue increased by 44.7% on a constant currency basis with outstanding growth in beauty of 145.8% on a 2 year constant currency basis. This includes a contribution from Perricorn MD and Dermstore as we scale our U. S. Presence and continue to develop our prestige our own brand portfolio. Growth in our Nutrition division of over 30% was supported by our vertically integrated model on expanded in house innovation capabilities. Our speed to market in developing highly targeted new products in response to emerging trends and needs is continually informed by data insights from our global customer base. Ingenuity Commerce momentum continued with sales growth of over 165% in half 1 and over 500% growth on a 2 year basis. A record number of end to end fully localized and serviced brand sites launched across 22 territories in the first half with continued growth in clients across a range of verticals. We closed the half year with cash on hand of over £870,000,000 and net cash of £385,000,000 making THG well capitalized to advance our strategic investment on a global scale. In terms of our operational and strategic highlights, The recent $1,000,000,000 placing in half 1 led by SoftBank provided further capital to accelerate our ambitious growth plans and execute a disciplined M and A strategy. The acquisitions of Dermstore, Bentley Labs and very recently Culp Beauty were all notable highlights, and we are well on track with our integration plans. Alongside the Placement, we announced a financial and trading partnership with SoftBank. We are early in this relationship, but we are pleased to announce that we have already established multiple live commercial partnerships between the SoftBank portfolio and our Ingenuity platform. In April this year, we announced our commitment to invest and roll out an additional 3,600,000 square feet of fulfillment and personalization facilities at key locations globally. This not only supports TSG's own brand growth plans, but also reflects the growth potential within Ingenuity. Our new 1,000,000 square feet ICON campus at Manchester Airport forms part of this infrastructure investment, and we are delighted to welcome colleagues back to the office safely during the last few weeks to a new thriving environment combining Europe's largest creative studios and state of the art automated fulfillment facilities. Today, we also announced our exciting plans to separate Andaliz THG Beauty in 2022. This naturally follows on from the work being undertaken within the group to separate THG Ingenuity and deliver the SoftBank partnership. Our plan to list THG Beauty reflects the continued strong organic growth of the division and its position as the industry's global digital strategic partner. But importantly, a separate listing for THG Beauty We'll better position the business to allow us to accelerate investment across THG Beauty and become a true global leader in what is an incredibly exciting sector. I will now hand over to John Gallimore, Group CFO, who will update you on the first half financial performance. Thanks, Matt. On the first half of this year has been super strong, and we are delighted to report constant currency revenue growth of 44.7% to 95% on a 2 year basis. Growth has been broad based across all divisions and we've been encouraged by the reopening of the group's experience venues in the Q2 particularly. The Beauty division in particular is a key call out with growth of 59% constant currency and we remain on track with integration strategy for Dermstore, Bentley Labs and our prestige skincare brand Perricone MD. As well. Our international footprint continues to expand. And further to the acquisition of Dermstore, U. S. Growth has accelerated, now accounting for 19% of group sales, an increase from 13% at the year end. Adjusted EBITDA was $81,200,000 for the 6 month period at a margin of 8.5 percent of sales. This was marginally below the prior year, primarily as a result of the diluted contribution of Dermstore as guided to at the time of acquisition. Distribution costs continue to be well controlled despite the increase in order volumes as the global infrastructure we have built helps us deliver more efficiently for our customers and clients. During the first half, we shipped over 20,000,000 orders to 195 postal countries, and we have made substantial investment in the group fulfillment Astra with 6 more fulfillment centers in the group network at the end of June against the same time last year. The group's international mix remains strong supported by our end to end fulfillment model, which utilizes an extensive local career network spanning 115 services, all of which are fully integrated into the Ingenuity platform. The group has built significant additional capacity in this global network to fuel future growth with our current integrations providing optionality for the end customer, enhancing the customer experience through customized communications. However, we are not finished yet. The investment into our global infrastructure to serve our growing Ingenuity client base and our own brand growth continues at pace. As we touched on at the full year results. Our ability to roll out so many sites in such a short space of time as facilitated by the deployment of our proprietary warehouse management software Voyager. The distribution costs reported in adjusting items relates to the cost of commissioning these new sites. The pandemic continues to cause complexities in Global Distribution, in particular, a significantly reduced number of commercial flights. This has resulted in temporary increased costs of €12,700,000 principally arising from these additional airfreight costs of shipping orders to our customers in Asia. This will normalize as passenger air travel returns and our strategy of localized fulfillment centers will remove this dependency in the medium term. 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 non recurring costs incurred by the group, which are classified as adjusting items. These costs include duplicated costs us whilst integration plan is executed, for example, closure of all facilities or offices. Non recurring costs, which do not relate to the underlying trading operations of the group, such as system integration work and validation, in addition to personnel changes. Depending on the size and nature of the acquisition and the complexity of integration plan, acquisition restructuring and integration costs can be incurred for up to 12 months post acquisition. Other minor adjusting items relate to several charitable donations as part of the group's pandemic response us in addition to legal and professional fees associated with acquisitions. Finally, within finance costs, The group has recognized a charge in relation to the fair value of the SoftBank option. Just to remind everyone, on the call. The option relates to the SoftBank auction and collaboration agreement announced on the 10th May that facilitates an investment of $1,600,000,000 for a 19.9 percent equity stake in THG Ingenuity. From an accounting perspective, the option is treated as a derivative and the value held by SoftBank is determined as being in excess of that defined in the agreement. This results in a non cash, non recurring charge for the difference. Our guidance on operating cash conversion for the full year continues to be around 100% with a working capital outflow in the first half of the year representing a return to a typical profile. Historically, the group has observed a working capital outflow in the first half that reverses with P trading in the second half. The half one period in 2020 saw an abnormal working capital profile given the marked acceleration in sales in the Q2 as global lockdowns accelerated shift to digital channels. Future CapEx will focus on the Ingenuity platform, whilst in near term we've seen higher proportional property CapEx expenditure as we build out our global infrastructure at pace in response to demand. We closed the half year in a net cash position with cash on hand of over £1,000,000,000 including undrawn facilities. This provides a strong liquidity position to enable us to continue to invest in a disciplined way for our future growth. As we turn to the outlook, overall trading remained strong, and we are confident in delivering full year 2021 group revenue growth of between 38% 41% on a constant currency basis. This equates to reported growth of 35% to 38%. Us. Margin guidance remains unchanged as stable adjusted EBITDA margins before taking into consideration the dilutive full year contribution of Dermstore. Capital expenditure guidance for the full year is between 10% to 12% of group revenue. On the call. The continued level of expenditure is driven by supporting an acceleration of growth plans to meet the demands of our own brands, in Ingenuity clients and reflected investments in acquired assets. We continue to take a highly selective and disciplined approach to M and A with strategic priorities remaining, beauty brands and assets to our capabilities to complement our brand building and digital commerce activities. I will now hand over to our divisional CEOs, who will take you through the highlights of their division's performance. The online beauty market is forecast to grow to over £80,000,000,000 by 2024, and we are more than well positioned to capitalize on this growth through our differentiated proposition across destination retail sites, our prestige own brand portfolio, our innovation and production capabilities, digital sampling and subscription boxes, aiding product discovery and all of this being powered through Ingenuity. We're pleased to deliver increasing active customer numbers, growing average order values and over 50% growth in beauty box subscribers over a 2 year period. Supported by our expanding brand portfolio, our broad and inclusive offering reflects consumers' increasing desire for products with high performance ingredients along with natural and ethical qualities. We further developed our U. S. Presence through the acquisition of Dermstore, as the leading authority in skincare. The integration plan is firmly on track with replatforming to Ingenuity scheduled to complete ahead of schedule. Since we expanded our prestige own brand portfolio 12 months ago, Perricone MD has been transformed to a digitally driven direct to consumer brand, extending its addressable market and ultimately its revenue growth potential and margin profile. As a science led topical skincare brand, at skincare formulations and supplements address a broad range of dermatological needs, supported by extensive clinical and consumer studies. Perricone MD is an important customer of Bentley Labs, our U. S. Center of excellence for new product development and production. During the last 12 months, we've launched 6 new products, including the intensive moisturizing complex CP Plus, The Blemish range and a hypoallergenic range. The acquisition of Bentley allows THG to internalize aspects us. Perricone and other THG brands and to accelerate the program of new product development for our own brands along with others. Perricone MD joined the THG Beauty portfolio of own brands, which continue to build their own respective D2C, following with 8 European and 2 U. S. Sites launched so far during 2021. All brands are now available on Dermstore with further expansion to Culp Beauty, our recent addition to the U. K. And Europe retail portfolio, which specializes in emerging and independent brands. In the portfolio optimizing our THG Labs innovation expertise across the U. S. And U. K. Through Aitreson and Aitreson. Us. THG Labs offers an end to end service that runs from product, packaging design, development, formulation development, international sourcing, Product testing, U. K. And U. S. Manufacturing, along with warehousing and distribution. Both ANA and Bentley have been integral to the building of category leading brands, with over 700 new products launched by Bentley since 2017, with a real specialism in clean beauty. Through our global customer base, we're able to leverage data insight to deliver highly targeted us. And innovative new product developments, enhancing speed to market and deepening our relationships with global brand houses and independents. It's been an incredibly active year so far for THG Beauty, and we move forward at pace with our ambition to be the fully integrated global digital partner of us. Positioned at the very center of the beauty industry. The THG Nutrition brand family continued to deliver us. Strong growth in both mature and emerging markets. Sales in the first half reached £328,000,000 us. A 30% year on year growth rate on a constant currency basis. 7,300,000 orders were delivered globally, A 1,400,000 increase on the prior year, and we continue to see strong loyalty from our customer base with high repeat rates and low returns. Our ever growing influencer network helped us in growing our active customer database to 4,500,000 as consumers continue to seek healthier lifestyles and consumption broadened across the categories we serve. Our inclusive activewear and lifestyle clothing range was one of the strongest performing categories with over 35% D2C growth. A similar growth trend was observed for our My Vegan brand, and we are increasingly seeing customers shop across the multiple brands in the brand family. Influencers and our branded web apps are a valuable source of content, education and product discovery for consumers with app downloads up over 200% year on year. Our 7,000,000 social followers and global community regularly engage with our brands through our social media channels such as Instagram and TikTok and our digital magazine. Brand Equity is extremely strong in our home market, where we maintain market leader status across all attributes and is growing at pace across continents with our recent customer insight survey ranking Myprotein as a brand consumers are engaged with, would recommend and with highly attractive products us in 3 of our major markets being the U. S, Japan and Spain. We are particularly encouraged by the continued strong sales growth in the U. K, us. Notwithstanding the challenging comparable period with this being one of our largest and most mature markets, These territories are supported by our global fulfillment infrastructure, including our India warehouse and an upcoming UAE warehouse, at a variety of relevant local payment and courier options and localized websites. Products are developed to suit local trends and tastes, optimizing the flavoring expertise from Clermont Ingredients, which we acquired at the end of 2020. At the same time, we announced the acquisition of David Bearimans, which has since enabled us to begin to unlock the potential within the ready to drink category. Not only have these capabilities and facilitate the development of new products within Myprotein. We have also launched across My Vegan, My Vitamins and Command. With plans to expand this across different formats in our own brand beauty portfolio. Across all channels, we are delighted to deliver growth of 59% year on year in the RTD category. Our future pipeline of new product development across our manufacturing portfolio, including the recently acquired Brighter Foods is testament to our in house innovation expertise, which is importantly contributing to the acquisition of new customers across a broader category segment. We look forward to sharing more with you in the second half as we continue to extend our category reach across global markets. Us. Following on from Q1, we are delighted to announce another strong quarter for Ingenuity Commerce, delivering 165 percent revenue growth for the first half of the year. Through our end to end technology and fulfillment platform, We processed the equivalent of 2020 gross merchandise value in the first half alone, with 50 end to end fully localized and serviced brand sites launched across 22 territories for new and existing clients across a broad range of sectors. To put that into context, at this reporting point in 2020, only 28 branded sites were active across the client base, and we already have a road map confirmed to launch another 70 sites in the second half with over 100 in development for 2022. Notably, over 40% of our client base is opting to internationalize with Ingenuity in addition to their initial master site, a key route to deliver our land and expand strategy with clients. Us. We have today announced a number of exciting partnerships with leading brands in their respective markets. The food and beverage category, in us. Has been an area of successful development with over 30 clients due to be live or on boarded by the end of this year, us. A resounding success from only entering into the category this time last year. Personalization has been a key differentiator in this regard with leading brands Nestle Quality Street, Mondelez and Coca Cola all utilizing our expertise to offer consumers the ability to create a us. Over 95% of our live clients now utilize our global fulfillment network, and we are scaling through investment in talent and infrastructure to leverage our leading e commerce technology, partnering with brands looking to grow globally online and at pace. Ingenuity is rapidly diversifying its outreach through global B2B partnerships to access pools of new clients. For example, PHG Ingenuity is now partnering with Google and ByteDance, amongst others to promote Ingenuity services to their customers, either on an end to end fully served basis or via modular components of the service stack. Us. Clients choose Ingenuity as it eradicates complexity and the need for multi partner relations with capabilities across all elements Technology, Operations and Digital Brand Building Services. Our modular end to end approach is quick to deploy, Disruptive on price, fully managed and hence, light touch for clients. The client journey begins at the configuration phase with a focus on 3 key work streams across technology build out, operational setup and e commerce performance planning, typically taking 12 weeks to launch. Once the site is live, we work collaboratively with the clients to review performance and optimize the user experience on the real time data we collect. Us. As the partnership develops, we are constantly evolving the infrastructure with the client benefiting from the continued investment into the platform that we make for our own brands across us. Through our land and expand strategy, we have supported in the further internationalization of Revolution Beauty and BWX, along with driving continued success of the Homebase partnership in a strong sustained conversion rate and use of our new state of the art us. We are excited to share more details of our expanding service proposition at our upcoming Capital Markets at this event, where we'll touch on our growing advisory and consultancy offering, which provides support to complex market entry. In addition to our developing THG eco sustainability services, proprietary and unique fulfillment software us. Our in house capabilities have enabled the group to collect and analyze customer behavior data throughout the pandemic as countries and regions moved in and out of restricted conditions. As a result, we have good confidence in the continuation of our customer behavior metrics in 2021 and beyond, namely consistently strong repeat rates supported by an increasing proportion of customers acquired via our branded apps. Whilst the pandemic is a one off crisis, The underlying numerous drivers supporting the continued shift from retention of online customer retail spend have not changed. For example, broader product ranging and availability given online has no shelf space limitations versus offline greater product education with thousands of user generated professional posts and reviews accessible easily online and superior convenience and payment options. As a result, returning orders drove 76% of direct to consumer sales in the first half of this year, supporting the stickiness of 2020 and historical cohorts. Us. We continue to invest in optimizing our user experience, establishing and deepening our relationship of trust with consumers. As an example with TSU's apps, returning customers revisit and make a purchase quicker versus desktop or mobile users on average spend more with us. Through tailored, engaging content, consumers are kept up to date with relevant trends and product launches, supported by our growing THD society network of influencers, brands and social partners. We will continue to focus on growing our app ecosystem as we head through 2021. We're well positioned to further build our technology and operating ecosystem supported by our end to end digital brand services. This includes our flagship TSU studio facilities recently opened at ICON Campus. Our in house website trade and digital marketing for TEEZ, are highly valued by ingenuity clients and brand owners alike. Coupled with our 270,000 square foot studio facility, We have a thriving creative center driving digital brand growth on a global platform. In our Q1 results presentation, we announced our commitment to further invest in 3,600,000 square feet for fulfillment and personalization capacity at key locations globally to support our own brands and Ingenuity clients. Today. The additional capacity is being rolled out over the next 3 years with progress well advanced at Saison Australia, the U. S. In Asia Pacific as well as our expansive ICON campus at Manchester Airport. This project will add around 200 percent incremental capacity over the next 3 years, enabling the group to fulfill over 3,000,000 orders per day with the 2020 peak period being around 1,000,000 per day. Our traditional approach to new warehouse opening is in 3 phases. Phase 1 to partner with a 3rd party logistics provider of 3PL on a charge per pick basis to establish logistics and supply chain. In Phase 2, we enter into leased occupation with responsibility for all headcount and related costs and supported by a full integration onto our proprietary warehouse management system Voyager. In Phase 3 with them to leverage automation and grow capacity. We are moving towards more automation over the next 2 years with much less reliance on labor, maximizing pick and pack efficiencies. We have the ability to retrofit existing sites to be more efficient if required. In addition, incremental beauty and nutrition manufacturing capacity will be added, which will expedite the speed to market for our growing own brands across all key global territories. We are constantly striving to become more efficient as an organization, whilst optimizing the customer experience and minimizing delivery times. Automation is now live across our ICON facility, which will support the peak trading period in quarter 4. In addition to our own infrastructure, today. We are today announcing the development of First, a single cross border prototype software solution in the form of the integration of Autostore's proprietary automated storage recovery system with headless elements of THG Ingenuity's proprietary infrastructure. Specifically, Voyager, our warehouse management system, us. TSG delivered our global courier platform of over 200 couriers and TSG Orbit, our award winning global customer service platform. There is no comparable product available in the market, which addresses all FMCG product categories by our unified distribution and fulfillment solution, providing a single data view to maximize efficiency. The benefits of 1st include partnering with the fastest automated storage recovery system solution with over 99.5 percent uptime, vastly reduced cost per unit, increased implementation us, Bede, with the removal of integrator layers, plus reducing integration risks and greater accountability given it is an end to end fulfillment, us in the courier in customer services software solution. 1st, we'll connect to all major third party platforms, bringing these benefits to the entire addressable fulfillment market globally. The first solution will underpin TXG's global rollout where it will be widely deployed. 1st represents just one of the commercial partnerships established between Ingenuity and the SoftBank Group Corporation portfolio. Current and pipeline collaborations range from end to end Ingenuity commerce contracts to single service solutions such as headless components of the Ingenuity stack, marketing, us. Ingenuity client financing and fulfillment enhancements. As we continue to scale, continued in house development is imperative to maintaining Ingenuity's position as a leader in the e commerce technology platform market, together with supporting the long term international growth at TSHG's brands. This innovation also benefits our TSH ingenuity customers with the same technological advancements that benefit our brands being deployed across our growing client base. At our recent capability enhancements of focus on improving the user experience, such as concessions in a site, us. Wish list tools which support customer loyalty and conversion together with subscription and save functionality, which offers customer optionality for regular purchases. To further support the customer journey, improved product imagery and options to compare products side by side are highly valued with a range of payment options, maximizing customer choice and ultimately conversion rates. Once the order has completed, Optimizing delivery efficiently is critical for our ingenuity clients. And we are pleased to have launched THD delivered, an end to end delivery management solution comprising technology delivery options, carrier management and end to end tracking. Us. DSG delivered has enabled over 72% of our global client base to be offered delivery as quickly as the next day. Across all global deliveries. PSG delivered has enabled us to reach a global delivery speed average of delivery on the 2nd day. Us. This is achieved by seeing more than 52% of shipments being delivered outside of the U. K. We have taken another step forward in support of our sustainability commitments by introducing a new eco delivery solution, which encourages customers to reduce their carbon footprint. CPG clients, including Nestle Perina, are already optimizing this solution as an expansion to their Ingenuity partnership post implementation of this functionality. All this would not be possible without the diverse pipeline of digital tech talent, in the Q1, which we are delighted to have grown by over 175 heads during September alone as we welcome our 2021 graduate intake. I'll now hand you back to Matt for his closing remarks. So thanks to John and the rest of the team by taking you through the various divisions that we have within THG. In summary, we are very pleased to deliver a strong first half performance across all divisions and a very busy 12 months since our IPO. We continue to remain focused on investing in support of our strategic growth ambitions, including across our infrastructure, us, namely our recently opened ICON campus and our global distribution network. Investment also continues at pace across our Ingenuity platform as well as each of our trading divisions and most importantly in our people. Today. We believe THG's long term growth opportunity is driven by growth in digital activity at a global level, together with product innovation and expansion across new products and verticals. Our Beauty and Nutrition divisions operate in large and expanding total addressable markets, each holding leading positions in many territories. To better support the investment plans of our rapidly growing Beauty division, we now plan to move forward with a listing of THG Beauty next year, with the business well positioned to become a global leader and brand partner at the center of the industry. The significance of our partnership with SoftBank is supported by the multiple live commercial partnerships announced today, and we are incredibly excited to move towards the market launch of 1st in 2022, which is our unique partnership between THG g Ingenuity and Autostore. We continue to see an acceleration in levels of inquiry from global enterprises looking to leverage the Ingenuity platform. And we believe the global growth opportunity for Ingenuity to be unparalleled. Thank you for joining us today and for your ongoing support. We now look forward to taking your questions. Us. Us. To ask a question. Your questions today will be answered by Matthew Moulding, CEO and the Executive team. We will take our first question today from James Grunzik of Jefferies. Please go ahead. Your line is open. Thank you very much. Good morning, everybody. Matt, just a couple of quick ones really. First one, great us. See the deepening relationship with SoftBank really fleshed out. Is your thinking still a half one twenty twenty two us in terms of ingenuity from their side. And secondly, can you perhaps to share some more thoughts on the beauty listing. Would, for instance, would you be retaining a majority ownership of that listed vehicle? Today. Thank you. Yes, sure. So in answer to the SoftBank question, very much on target in terms of the relationship with SoftBank. Been incredibly pleased with the contribution they've been able to make to THG to date, and the relationship is something us that we work on a daily and weekly basis. So very much on target for that in early half 1. And then in terms of the beauty question, James, just remind me again on the IPO, was it us now for that. The majority shareholding. Sorry, yes, the majority shareholding. I was wondering whether you would yes. Sorry, James. Yes. The plan very much is we would just be listing a minority stake in the beauty business, and we'll be returning a majority ownership. And obviously, Ingenuity will be providing all the services end to end to the listed entity. Our next question will come from Rob Joyce of Goldman Sachs. Please go ahead. Hi, good morning. Thanks very much for taking the questions. Us. Just a couple. So firstly, just on the ingenuity partnerships you announced with SoftBank that you're working on. So us. Appreciate the detail on the auto store. Would you be able to give us a little bit more insight into what you'll be doing with the which of the SoftBank us. Banners will be looking to work with and what you'll be specifically doing for them. And then linked to that, I guess, us. With all this incremental Ingenuity contracts and partnerships, does the consensus next year looking for Ingenuity revenues to roughly double. Would these be coming on top of that, do you think? Is there room for Ingenuity to grow a bit further than that? Us. And then the final one, if you could just give us a bit more detail on what you want to go through at the investor event in October, what things you're focusing on, what we should expect to and take away from that. Rob, Steve Whiteshead here. I'll pick up the first one, maybe the first us. So on the SoftBank relationship, it's early days. It's super positive. We have daily conversations with either the SoftBank team directly or their portfolio company management teams. And so in a very short space of time, we've covered a lot of ground with them. So there's a range of types of projects, obviously, within 4 months. The ones you can get live sooner are the more immediate partnership base where it's us. The portfolio company is primarily providing services to us where it's augmenting the platform, whether that's with us. Payment options or whether it's with 1 hour delivery services in country, so really optimizing augmenting the platform. Us. The larger end to end TEG Commerce, the larger headless productized elements of the platform where we in a forum where we can provide some quite meaningful services and meaningful contracts to portfolio companies. Those projects are more numerous and we had identified before the options entered into. They've all been progressed very positively, but of a nature and a size that always takes a little time. But we're super happy with that range of deals us. They're in discussion, and it's more than vindicated the relationship build that we invested in back in May with those guys. In terms of the impact to the numbers, look, there's a lead time to these things, as I've said. For part year on some of those smaller projects anyway. They're just going live. So the consensus of circa 50 to circa 90, 2021 and 'twenty two for commerce revenues. It is right. We're happy with that. We don't see these as over and above or in addition to and we're not trying to quantify at this us on time. We'll keep updating on it, but that consensus is correct. And then perhaps on at the Capital Markets Day. Others may jump in and augment. But principally, The focus around Ingenuity is to really help with the education piece so that people truly understand that in a for digital supply chain environment today. This is a unique end to end solution across the technology assets and the real world assets all being in one place with 1 supplier to address 50 to 100 fully localized territories plus ultimately every country in the world. But that's a unique solution to a digital supply chain challenge, which Ultimately, brand owners and retailers have only had one solution over the last 20 plus years, and that's multiple suppliers just to deliver 1 country, let alone 1 supplier to deliver 50 to 100, which is ingenuity. So it's much more of a broader piece. We're going to think about a little bit more detail around KPIs to help people understand the division a little further. And then, of course, all of that is building in terms of the detail for FY 2022. We've said in the release that in H1 'twenty two. We will be giving that granular breakdown on divisions between Beauty and Nutrition on a stand alone basis with the Ingenuity contract going through. And then, of course, we'll show Ingenuity as a stand alone. So we're building to that segmental clarity. Us. Probably if that covers everything, Rob, hopefully. And then Just one more quick technical one maybe. Am I reading it right? The exceptional relating to the ingenuity option actually suggest that the value of that option has gone up since you signed that agreement. Is that how that works? Effectively valuing it like a call option. So you could have a call option, Rob, for any share to buy something at a fixed price, and it's effectively valuing that option from a SoftBank perspective, and therefore, we have to have the corresponding liability in THG's books because as they exercise that option. It's of great value to them, and we just have the reciprocal in our books. So you're out, Rob. It's basically The auditors reviewing the data and then saying that they believe that SoftBank have made a profit on the auction so far, so the value to them has gone up. We have to set the corresponding journal. Very clear. Yes, exactly. That's why it goes up live, Bill, to your side. Thank you. Appreciate it. Thanks a lot. Us. Our next question comes from Roland French of Davy. Please go ahead. Hi, good morning everybody. A couple of questions from my side if I may. Just starting with Ingenuity, there's a reference I guess to gross merchandise value within the slide deck. Just wondering if you could clarify what that number is in terms of the 3rd party brands on your Ingenuity platform. Secondly, just on supply chain. I know there's some rhetoric that you're able to mitigate some of the headwinds that you're seeing through the first half, just a general observation through H2 And beyond around, I guess, freight distribution and labor in particular, I'm sorry, and maybe on the nutrition side around whey input costs. Us. And then thirdly, more just one for clarification. I think around 75% or 76% repeat rates across the D2C sites. I'm just checking, Is that repeat customers? Those customers have ordered more than one time during the period? Or are those customers returning from prior year or prior comparative period? So John will do question number 1. I'll do question number 2, Matt Holding. And then Adam, our Chief Marketing Officer, will do question number 3. Over to you, John. Sure. Look, we don't reference what specific GMV is, although we as you know from the comments in the past, it's growing at the rate you would expect given with the acquisition of clients and the expansion of services we're providing for clients, which is not a KPI that we do go public on at the moment. In terms of the second point around the well reported staffing, inflation, logistics pressures, etcetera, that are out there at the moment, Yes. Look, I think any business, certainly in the U. K. But beyond, we'll be seeing various forms of inflationary pressure, whether that's in the commodity markets or whether that's in people or logistics and freight and all those kind of things. And as you touched on there, we do believe we're pretty well positioned us. We have ingenuity, which continues to increase in contribution, which is a high margin business that helps to offset some of those us as they come. We also believe those costs aren't necessarily permanent in any way. We believe the commodity markets will significantly improve over time. It's just been quite a short period where you've seen some rapid rises in all commodities during that period. So we do think us against that and the broad replenishment environment. We will be able to navigate that quite well. FX headwinds are pretty material out there, but FX comes and goes. And so just I think on those FX numbers that were out there, maybe 250 basis points impact to sales. To put that in perspective for you. I think it was near a 4.50 basis points in Q2 alone. But you just got some volatility out there, but us. That could easily just reverse again in a matter of weeks. So these things come and go. But generally speaking, that's how we're looking at the outlook of the inflationary and staff pressures. We are helped as well by the level of automation that we have in our Logistics Centers book, but especially what's coming live. So a lot of the investments we've made of late have being in automation, and we have an auto store ingenuity facility going live right now. So and that's obviously very heavily automated. And to answer the question on the 76%, that's returning customers' orders drove 76% of sales during H1 this year. Us. Can I just add a 4th, maybe just top line through the period? Yes. So that answers the 3. Could I just ask you just in terms of the M and A contribution top line through the half? Yes. Sure. Look, the trick is we don't split it out. And just to give real clarity why we don't split it out, it's because where we've made investments, typically, if it's in Nutrition, it's been in at manufacturing and product development. And really, that's just all about driving future growth. It'd be small and immaterial in any event, but that's about driving the range of developments across that brand to drive growth for future years. So we'd definitely be wrong to be looking at whatever sales contribution comes from that. And then in terms of on the beauty side of things, we always give the numbers on anything we buy. We say this is what we expect the contribution to be, and then we'll leave it from there afterwards. And again, the reason for that is the primary focus of our Beauty division is to build out at a couple of key verticals. Look fantastic, we're trying to build into the global number one platform. As a result, we then have secondary brands that we alongside it in different territories. So Culp Beauty was post top 1, but you'll see that, that's aiming at the rest of the world and the U. K. And Europe, Whereas with Durnstore earlier this year, which did contribute in the period that's a USA focused alongside look fantastic. Us. So what would quite typically happen is we may well be looking to move customers from one platform or one brand onto another as we look at that goal of building look fantastic to that dominant position. And so if we started to split these things out and report on them, it could send mixed messaging at different points in time when we're really clear that that's the goal for the business, and we'll always say what we believe the contribution to be and then give our full year expectations at the same time. Our next question will come from Paul Rossington of HSBC. Please go ahead. Good morning, gents. Well done on the numbers today. On Beauty, my question, that's There's an awful lot of M and A activity around the beauty space right now. It's a supply chain that a lot of companies are trying to access. Us. Does that mean that there's going to be more new market entrants into that space? Or is there going to be a limit on the number of new kind of players coming in because the major brands don't want to distribute through every single channel. I'm just trying to work out what the competitive spectrum looks like there because we have seen a lot of transactions take place, a lot of strategic partnerships announced, etcetera. So that's the beauty. Thank you. Yes. Sure. Look, the competitive space, I mean, I think forever, beauty is being seen as a very attractive arena through which lots of people would like to operate. Us. I don't think that will change in the next 10, 20 years either. I do think it's an incredibly to market great growth dynamics and it's a truly global market. So I do think it will always be an area that everyone will want to get into. I I think the chances of people succeeding in going into the supply chain will be difficult because us. Brand owners are very protective of the brands. And getting supply is incredibly difficult. And even at our scale, We have to make M and A to fill in certain brand gaps along the way. So you can't announce that you're going to enter the market and then become a global player. That's not how it would work. Otherwise, we would deal and love to do more about ourselves and save the CapEx on the M and A. But I do believe that will continue to be an interesting sector to everybody. It is worth pointing out though, we've got a very differentiated business model to anybody else as well. Just as a reminder. I mean, I think there's a video that we posted as well, which takes us through the beauty business model in more detail, but that's on the group website. At one end of the spectrum. We're a product development house, developing products for all the major brand owners plus ourselves. Us. And then through Lookfantastic and the sub brands, we're one of the biggest retailers of beauty products in the world in the digital sense, covering all different territories. We have a really strong subscription box business as well, so we tap into all the marketing. And then we also own some of our own brands. And then at the same time, we're powering a lot of brands, beauty brands, digital us. Expansion plans into different territories. So we have got a very differentiated relationship with Beauty Brands than I believe Yes, most of the people would have. But I do believe it's still a very interested market, and there'll be new entrants wanting to come for the next decade. Okay. And one Excellent for me, if I may. On the nutrition side of the equation, you've done the deal or the trial you've announced with Asda to raise brand awareness of Myprotein in the U. K. Have you got any plans to do a bit more with Myprotein in the U. S? So it's been a big focus of on the Butte operation this year, but where are we on tracking the U. S. Market with the nutrition product? Yes. Sure. Look, we made really good progress in U. S. I think the growth rate is in the U. S. Is higher than the growth rate, which for the brand in general. So we're growing faster there than we would be as a whole. And we continue to obviously leverage with a lot of the things we've done in THG's infrastructure in the U. S. Obviously, benefits all parts of the group, Not just beauty, but nutrition as well at the same time see significant benefit from when we're opening multiple warehouses across the U. S. And put in an infrastructure. So look, we'll continue to do that. We'll do it in our way in a digital sense. We don't tend and put as much money into off line areas, etcetera. We believe in that influencer led model. We've also got our own influencer platform, and that's been quite successful for us. And whilst a lot of people have focused around the U. S, It is worth noting that probably the single most exciting territories in the world right now are probably India and the Middle East, but India in particular, and that is somewhere where Myprotein is very focused right now and see some fantastic results. And I'd probably say that that's Our next question will come from Charlie Muir Sands of Exane BNP Paribas. Please go ahead. Yes. Thanks for taking my questions, guys. I wonder, first of all, just going back to the proposed listing of THG Beauty. I wonder if you could talk about the rationale for listing as opposed to looking for strategic partner, which is what you've done with the Ingenuity division. And what is it about separate listing that you think will particularly aid The business, is it the need for more capital? Or do you think it needs to look through valuation? Or is there something actually sort of operational that and be facilitated through that. Thanks. I mean, look, the principal reason behind this is the opportunity in front of us is And we've already deployed significant capital into that sector, but we see an opportunity, especially post COVID to further accelerate that. That is a really difficult thing to achieve when you consider that it's a subdivision within THG. I think broadly speaking, the feedback I get told is the analysts value our beta to division of maybe 1 to 2 times sales in the overall group number. The challenge with that is we can't buy an asset of that at those values. So every time we look at buying things across the BT sector, when we make a major investment, it's diluted potentially diluted to the group, which then when you've got significant expansion plans and investment plans, it's probably not the appropriate thing to be doing those investments in our current form. So we believe that if we can give the division much more focus and people can get a real appreciation for that, then as we put more and more investments into it and take that dominant position on a global us. It will just be a far better positioned asset, and making investments will become far easier Yes. It has been in, say, the last 12 months. Charlie, Steve here. Maybe if I pick up just on the on the partnership piece, which you asked as well on the optionality, why is it different than choosing a strategic partner? It's really one and the same thing. You get that clear beauty investor mandate that Matt talked about. This business model us. It is unique in the beauty industry across it's got a right to win as the largest skincare reseller online globally. Us. 1, 2 or 3 positions as a brand builder, NPD production, sampling through glossybox and a digital led brand portfolio. It's a unique asset. So then when you put it out there on a clean, clear, single prestige beauty mandate as a listed entity. That is the clear partner to then be aligned with looking at its options for strategic us. Alliances and agreements with the other the dealer Beauty Strategics. At the moment, as a part of THG, It just lacks that clarity. So it's actually an enablement step to exactly that kind of collaboration partnership, which we think is probably going to expedite the development of that business. Us. Great. Thank you. And if I could just follow-up briefly on a couple of points around guidance, please. You've obviously reiterated the full year revenue guidance. I appreciate you haven't actually given us the M and A contribution for reasons you just discussed, but it It appears that roughly maybe you're assuming sort of similar organic run rates from Q2 maybe progressing to the second half. Us. Is that the right way to be thinking about it? And is there any sort of color you could give around trading so far in Q3? And then on the adjusted EBITDA margin side, you've obviously reiterated this as stable margin I think the original math suggested maybe circa 40 basis points dilution year on year might be around about the right number. Thanks. Yes. Look, I think sorry, it's Matt Moulding here. I think just to touch on those points, and Matt will Matt Rockwell will jump in us where needed. I mean, on what we're seeing for the rest of the year in the individual trends, I mean, look, to be briefly honest, I think us. We give quite a lot of disclosure. I know everyone would always like more. We've got a number a guidance number out there for the full year. And we've got the half year here, and we updated with a small upgrade, I think it was just a matter of weeks ago. So the short answer is that's our guidance. That's why we genuinely believe the second half of the year to be. You'll get nuances in different quarters from time to time depending on your different trading calendars, your different comps and whatever. Us. Broadly speaking, we feel pretty comfortable on all of our guidance in that regard. In terms of then the EBITDA margin, I think what we've said Look, we see stable margins on an FX constant basis more broadly. So if FX goes a different way and it starts bouncing back, us. Then there'll be a contribution from that and so on and so forth. We also have hedging strategies that minimize the impact of that in any way in any event. Us. So the earnings saw contribution and any potential dilution on that, it's relatively small. Was it 0.4%, is that about right, Matt? Maybe to the overall 0.4% across the full year. 0.3% to 0.4% sort of impact. And then I think we've got in the announcement when we bought it. We'd about that within sort of 18 months then to be on normal group and be non dilutive anymore. I don't know if that helps. And I know everyone would like to know what today's trade is like and the rest of it, but unfortunately, we can't do that. We have confirmed that we do a trading statement for Q3 though on October, Charlie, so we'll provide more color on that then. And in terms of the acquisition contribution, And the one thing I would point to is if you took what's in our R and Ss and backsold that out, which you can do, you'd still see that the organic growth is above the at the top end of our medium term guidance range of 20% to 25%. So we're pleased with the organic performance across the first half. Thank you very much. And so I think I understand the comment about FX with respect to margin. Are you saying that Current FX is a margin drag beyond that constant FX, stable margin gap. There's always a risk it could be. FX is a margin. Yes. Lovely. There's always a risk. We have hedging strategies to minimize that. We have Ingenuity's contribution. I guess, If FX starts to move considerably further in either way, then it will be a small contributor or a small dilutive. It just depends on how we see that happening. And we can't control FX, but we can't arguably, we can't control inflationary pressures, but we have lots of ways in which We do minimize the impact of that through automation, tech stack and ingenuity and so on and so forth. And then equally, we try and minimize the impact of FX at the same time. It's the last quarter was slightly livelier on FX. And then when we look at how our us. Currencies have moved, and we see that. We don't expect that to dissipate anyway, unless there's another different reason for things moving. It's certainly not structurally a long term thing FX, but as you can see, the top line is a 280 basis point drag us. Reported growth versus constant currency growth, and that's why we're very pleased with the margin performance in the first half because that's been absorbed through to the bottom line through a combination of hedging and then offset with other savings across the business. Us. Our last question today will come from Andrew Ross of Barclays. Please go ahead. Great. Thanks for squeezing me in. My first one is just following up on Charlie's question there on the beauty listing. You clearly have lots of investments you want to make into the business. Do you have a sense as to how big the quantum of those might be? Or put another way, How much money you might want to raise as part of the listing into Beauty? And then the second question is on Nutrition, where I think in the statement you also say option still open to that division. So could you just give us an update as to what kind of options you're thinking about there and how you're thinking about capital allocation into that business over time. Thank you. Thanks, Andrew. Steve Whitehead here. I'll take the first question, and Matt will take the second. So just in terms of that beauty listing, the whole purpose, as we've said, is that clear mandate to deliver that prestige beauty on the strategy. A key cornerstone to that, we'll be building out that digital first portfolio today. We've got 8 brands in the portfolio, which are predominantly digital, truly global. That in itself is a highly differentiated asset. It's D2C in its margin structure. So again, it's highly differentiated. And the opportunity to broadly double that portfolio size is compelling. As the biggest ultimately reseller globally in skincare and hair care. We have a mandate across multiple categories to really operate a broad owned brand portfolio. So if we double that portfolio over a 3, 4 year time frame, That's going to require significant investments. So the whole purpose for the listing is to create that platform to raise that primary. Us. Beauty brand assets are a 5 to pushing 10 times sales revenue multiple asset class. Us. So raising yes, we will seek to raise a meaningful amount of primary to really enable THC Beauty to build on that opportunity. If that answers that, Andrew, I'll pass over to Matt. So then on to the Nutrition business and what are the options for Nutrition. I mean, look, at the moment we announced SoftBank deal. We have led the path for this kind of progress because clearly Ingenuity is going to be servicing each of our divisions and continue to do so. We've got plenty on now for the first half of next year in terms of the things we've already announced. Clearly, though, longer term, we'll be looking to build upon the position that we have within Nutrition, and we'll be looking at us at partnership potentials and what collaborations there are, which we remain open minded at this stage as to what they are, but us. Cool. Can I just follow-up on the third one as well? Sorry to be cheeky. But on Beauty, in Q2, revenue Growth slows, both reported and organic. And I assume a big part of that was because the comp is much tougher, which is logical. But I don't think we actually have the percentage growth numbers from 2020 split by Q1 and Q2. So it's hard for us to analyze kind of what's going on on a 2 year stack. But is there any more color you can give us just about that slowdown in beauty in Q2, kind of trends you're seeing as you lap against that COVID comp. What can you tell us about how it's trading over 2 years? Just to kind of give comfort on that. Yes. So I'll hand over to Rachel, CEO of Beauty, to answer that. But safe to say, Andrew, that when you're growing in Q1 at an incredible rate, it's I'd be surprised if people didn't think it would slightly slow down in Q2. But over to you, Rachel. No, of course. Well, as you touched on Andrew as well, it's important to remember that in Q2 last year, We obviously started the global lockdown for COVID-nineteen, which did drive significant changes in consumer behavior. So in this instance, I would guide to the 2 year trend, Which gives a more indicative view of the success that we're seeing, where growth very much remains in line with what we saw in Q1. Organic growth, just to give you some flavor on that, so excluding acquisitions, remained broadly 90% for the first half. So we're feeling very comfortable on the guidance that we've issued. This will conclude today's question and answer session. I will now hand back to Matthew Moulding for any additional or closing remarks. Well, thank you, everybody, for taking the time this morning. We've had a good volume of people dial in. Very much appreciated taking the time. And Just like to say thank you to all of our many thousands of staff that have, through very difficult times, have made all this happen for us.