THG Plc (LON:THG)

CMD 2021

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Oct 12, 2021

Good afternoon, everyone, and thank you for joining us for our THG Capital Markets event. My name is Matthew Moulding, CEO of THG. Well, what a year. We came to market in September last year as the U. K. Largest IPO in 5 years. Since then, we've upgraded forecasts, hired an extra 3,000 people, raised over $1,000,000,000 in fresh firepower and brought on board the world's largest tech investor, SoftBank. We recognize that after just 13 months as a public company, We still have a lot of work to do in educating investors and others, and that is the purpose of today's Capital Markets Day. Our focus today is on the THG Ingenuity Tech platform, our rapidly growing technology division, which complements our other divisions, Beauty, Nutrition and On Demand. This event has been in the diary for a couple of months now, but we've been thinking about it for much longer with the aim of giving a more granular insight into THG ingenuity and helping you to understand why we are so excited about this business. In addition to Ingenuity, we are also speaking about sustainability today, setting out our 2,030 sustainability strategy. Phil Pratt, our Chief Sustainability Officer, will talk you through this. We have set some very ambitious goals, including to be climate positive and to offset our historical emissions. Back to Ingenuity. This is a unique platform, which takes brands direct to consumers all over the world in almost any category. It is the highest growth and highest margin division within the group. No other company can offer all these services as a one stop shop. Hosting, marketing, content, translation, merchandising, payments, design, warehousing, couriers, customer services and so on. The disruptive nature of Ingenuity delivering world class direct to consumer solutions in short time frames at a fraction of the cost of other providers will hopefully be clear. I'm joined today by John Gallimore, CEO of Ingenuity and Hannah Pym, Managing Director of Commerce. They will take you through a presentation detailing the various aspects Within Ingenuity. They'll also run you through some case studies of the kind of work we're doing for clients, really showing you how it works in practice, and we'll also share some customer feedback. We have spent 17 years and invested over $1,000,000,000 to get to this position today. And this investment is clearly beginning to reap the rewards. H. As an example, I'm pleased to say that in less than 10 weeks since acquiring Culp Beauty, we have successfully migrated the business onto the Ingenuity platform. This is many months ahead of schedule. And to be clear, a complete end to end replatforming of a $200,000,000 revenue e commerce business would typically take years for any other business to deliver. H. Beauty alone is a case study reflective of our technology and experience in being able to complete these transformations and execute them seamlessly. Before I hand over to John to start the presentation, I should also say we are clearly aware of the short attack that was initiated against THG in the past 10 days, centering around the capabilities of our Ingenuity platform. It's fortuitous, therefore, that we have the opportunity today with this Ingenuity Capital Markets event to set the record straight on any claims made. With that in mind, following the ingenuity presentation from John and Hannah, We will also then have time for Q and A to address any questions you may still have. And with that, I will now hand over to John, who will take you through THG Ingenuity. Good afternoon. Good morning, all. I'm John Gallimore, Group CFO of THG and CEO of THG Ingenuity. I'll be joined by Hannah Pym, Managing Director of THG Ingenuity Commerce, and we are delighted to welcome you to our first Capital Markets event. It's perhaps one of the better time Capital Market events of the year and very, very well attended too. So welcome to everybody. Our objective for the session THX. Is to do a much better job than maybe we have done today in explaining what ingenuity actually is, what we do for our clients, why they use us and from that, and perhaps more importantly, where will our growth come from. Digitalizing and globalizing a brand is terrifically complex and equally expensive with a high failure rate, which is why so few brand owners have ever done it. In 2004, THG operated a one territory outsource website, plugging into a third party logistics solution, shipping just to 1 territory. TH. At the same time, margin cash burn and profitability were a real issue. 17 years on for most brand owners and retailers, not a lot has changed. Consumer demand for digital commerce is here to stay and accelerating. Companies need a commerce platform that is flexible and scalable for today's world of commerce anywhere and everywhere. And this is exactly what THG Ingenuity delivers to our customers of all sizes, industries and geographies. THG. Hi, I'm Hannah Pym, Managing THG Ingenuity Commerce. Ingenuity is a platform that has been built over the past 17 years to deal specifically with the costs, points of friction and complexities of globalizing digital brands across a range of categories. Its credentials in this respect are clearly represented in the growth to dominant positions of our brands in both nutrition and beauty. THG Group's Global Brand Building and E Commerce Activities. THG Ingenuity is now increasingly becoming the partner of choice, powering the growth of some of the world's largest brands. This has been achieved through continuous innovation, development and investment in proprietary technology, Operating Infrastructure and Brand Building Capabilities. Ingenuity is completely unique in that it is both a peer to peer e commerce retailer and a service provider to global cross border commerce operations. The same technology that drives the growth of our Ingenuity partners also powers the growth and success of our own brands. As a result, any developments and enhancements we make to our technology, our operations, Our digital or data solutions automatically benefit our clients too. The genius of the Ingenuity platform is that we make the complex Simple. This allows brand owners to focus more exclusively on their go to market strategy, confident in the knowledge that THG Ingenuity has the integrated capabilities to deliver with the resilience, speed and know how across all territories. Transforming processes from complex to simple requires deep THG's and valuable experience and that we have gained from the successful scaling of THG's own brands. Through the process of growing these brands globally, it has become evident that building a successful direct to consumer proposition that can efficiently scale and is truly localized to its markets, requires significant financial investment, time and resource. Just rolling back to 2004. We started with 2 components from this slide, TH, a very basic e comm engine and 3rd party fulfillment solution. Cost was our barrier. We just couldn't afford any more back then. For those that are better capitalized than we were back then, the issue then becomes one of solution and vendor selection. For example, which pieces of marketing technology do I need and who is best to provide it and at what cost. The puzzle continues beyond the technology variables into the real world challenges. Most brand owners just aren't qualified to make those decisions, so they outsource the vendor selection process, adding yet more cost and reducing solution accountability. So having laid out all of the pieces, they need connecting and then operating. Again, most brand owners just aren't qualified to do this. There are countless friction points and failure points within each component. Linking them all up then increases this. It becomes virtually impossible to operate an efficient platform resulting in high technology costs, low conversion rates, low repeat metrics, acquisition cost and consequently loss making models. With internationalization, TH. The challenges, costs and risks are magnified. This is why so few have been successful in this, despite the Internet been around for decades and why Engineered E Commerce is so well placed as a solution. Ingenuity is a combination of complex e commerce technologies, real world physical assets and infrastructure, and perhaps most importantly, brand building capability. TH. This is soon as take tiny brands in nutrition and beauty to global leading positions. So this is the preceding spaghetti slide laid out. So bear with me while I take you through each component as they are all critical. We start at the top with an e commerce platform, the bit that comes first for all. We could debate all day about who is the best amongst technology peers, but this is where the comparisons end as this is the only element in our critical wheel where most of our tech peers provide. I'd argue that the addressable market for most organizations that you would consider peers doesn't even cover all of this spoke. Our solutions and TAMs now start to build. So having selected an e commerce platform and in many cases, This has been preceded with the selection of the solutions integrator. He would typically put these types of projects together. The next issue will be the selection and integration of trading and merchandising tools. Any merchant with more than 1,000 SKUs will need a PIM or Product Information Manager. This allows them to upload products into a website. Thereafter, they'll need a CMS, a content management system. This manages the products on a website, layout, attributes and so on. Wrong choices or poor execution will kill conversion rate. This comes out of the box of ingenuity and is proven to work. Once merchandising tools are selected and integrated, marketing technology comes next. This is all about cost effective demand generation and conversion rate. The tools required for this include a search engine on-site for our customers to find what they want, a CRM engine to monetize and segment the customer base personalization to tailor the experience to what a customer wants to see T. H. Affiliate and partnership management tools, paid search tools and influencer management tools to manage a huge database of influencers and opinion leaders globally. There's bucketloads of potential solutions to each of these, all critical, as a marked in cash burn and high customer acquisition costs will kill majority of all digital business models. Again, these all come out of the box with ingenuity and they are proven. For any digital platform that extends beyond a 1 country, 1 small shed model, a sophisticated order management tool is required TH. To deal with the complexities of payment and warehousing. Again, out of the box with Ingenuity Commerce. Effective order screening for potential fraud is often neglected, but this hidden cost can weigh heavily on any model. It's not just about keeping the bad guys out, but equally as important, not stopping, delaying or even canceling good orders. We outsourced this service, trained many vendors over 16 years. 18 months ago, we deployed our proprietary version, THG Detect, and the results have been amazing. For Dermstore's platform, the chargeback rate reduced from 3% to 0.1%, incorrect rejection rate was reduced fivefold and order referral rate for manual checking reduced from 9% to 3% versus their previous supplier. THG Detect is now headless and available as a stand alone product. For anyone on this call who may need this requirement, I can offer a free year 1 trial. I can do this because our costs are certainly negligible. And again, ingenuity commerce clients Get this out of the box. Checkout and payment is such an important area. You can imagine experiencing a physical store, TH Long queues for the tail, payment cars not accepted or even worse, cars declined for no reason. This is the digital conversion rate killer and most merchants just don't even track it. It's not just a case of having payment options such as the prevailing types and say the Netherlands, South Korea or China, They all differ. There are so many different types now, credit, debit card, wallets, buy now, pay later, crypto and so on. Maintaining pace with innovation here is simply not enough. For example, having the wrong acquiring bank in a cross border transaction can add 10% onto a standard decline rate. That's a 10% hit to conversion rate. This area is very well served by aggregators. But at scale, the savings are huge by disintermediating these distributors, up to 2% on sales. We built out a sophisticated suite of payment options to suit the global market, and we continue to partner with innovators in this field to add to our capability. As before, out of the box with ingenuity. This not only provides the merchant customer choice, plugging into other client solutions, such as with Mondelez and their amazing partnership with Espoo Capital. Again, I can make this solution available for free for a 12 month period, excluding the pass through transaction cost that is, because again, Our delivery costs are negligible. So let's move on to real world assets, beginning with data centers. The relevance here is one of merchant cost and Customer Experience. Consider a customer in San Francisco, Tokyo or even Manchester, for example. TH. The tech giants offer great cloud based solutions here, The costs will escalate way ahead of any revenue build, particularly as bandwidth heavy video grows to support social channels. We know because it happened to us as we internationalized. Our solution was to turn a big cost center into profit. So in 2017, we acquired a cloud based hosting business, giving us all the capability we need and also £25,000,000 swing in cost of profit. Revenues from hosting only clients are not reported in Ingenuity Commerce, but the wider Ingenuity business. Ingenuity Commerce clients get the benefit of this superb service wrapped into the ongoing tech license fees as it's a hosted solution that we provide. It also means that our cost of hosting Ingenuity Commerce Clients is negligible, unlike many of our tech peers. It's a very similar story with translation services. The importance of doing this well isn't just about offering a credibly localized website to a customer in country, which is super important. There can also be a huge impact on marketing cost if areas of the site driving SEO and performance marketing are translated well. Several years ago, as we accelerated our internationalization, our outsourcing costs were escalating. So we acquired a business with a specific expertise and the client base, again, turning our cost into a profit. All of our ingenuity commerce clients get the benefit of this capability as we internationalize them At Pace. We are a brand builder that is fully vertically integrated. Product innovation, development and manufacture, we believe, essential to this. We are a digital business that gets access to data points in real time from all over the world. The relevance here is that if we can convert those data points into a faster innovation process than our competitors, while guaranteeing high quality, and our shelves will always be more relevant and attractive to our customers, a key foundation in any brand builder. We have Beauty Labs in North America and the U. K, alongside Nutrition Labs in North America, the U. K. And Europe, supported by bar manufacturing, ready to drink manufacturing, a flaring house and pill manufacturer in the UK. These facilities service both internal and external clients. Revenues from external clients are not reported in Ingenuity at any level. They follow the category. Clients of our U. K. Beauty Lab are reported with an ingenuity. In 2022, T. H. Fulfillment. I could and should spend all day talking about this. This area and delivery are arguably the most important spokes in this wheel. It's the only physical touch point with any customer TH. From my experience completely ignored by 90% of all merchants or impossible to do well and cost effectively without GMV Scale. Having suffered terrible provision of WMS, warehouse management software, we built our own in 2017. It's called Voyager. This now powers THG fulfillment centers across the globe from entry level CapEx light facilities such as 60,000 square feet in California 2,000,000 Square Feet Automated Solutions in the U. K. As part of our recent collaboration with SoftBank and Autostore, We're in the process of commissioning a fully automated 800,000 square foot put away retrieval solution in Manchester. Having only accessed this new building in April, we have built the solution, inbound over 6,000,000 beauty units and are already dispatching orders. That's quick. The beauty of this model is that it removes the complexity of combining both the software and hardware required to power such facilities. Essentially, we take our order management service, which flows into Voyager, our WMS. This wraps around the Autostore solution, removing that complexity, but then feeds downstream into our sophisticated career library called THG delivered to deal with the complex global delivery requirements. This product is called 1st. It is flexible. It can plug into any commerce engine, is quick to deploy, as we have evidenced, consequently low risk and inexpensive and deals with all the downstream complexity of delivery and any customer service follow-up. We estimate it to be at least 30% more efficient and any manual solution, a metric that is only going to grow as labor costs and shortages exacerbate. Payback on a side investment THG or any client in less than 3 years. Our standard manual void system and First are standalone products with a huge time in their own right. Once first start to commercialize with 3rd party clients in 2022, we will be charging a margin in addition to the pass through costs, and these will be disclosed and included within Ingenuity Commerce. 95% of our Ingenuity clients make use of our fulfillment services. Prior to 2020, we offered this service to all clients at cost. Consequently, at present, we did not include those revenues or postage delivery revenues TH. Within Ingenuity Commerce, but within the broader Ingenuity definition as a cost pass through item. Next up is print on demand or personalization. This is by no means essential to an e com model, but a real differentiator. Some of you on the call will remember Zavvi, and some of you probably forecast the downfall. For those who don't know, it was an entertainment retailer selling computer games and DVDs. We acquired them out of administration 14 years ago. As with most of the spokes in this wheel, necessity truly was the mother of invention. To evolve that model and deliver profitability, We created a licensing and personalization business. Some of the capability in that solution is now put to use in product differentiation for some of our confectionery clients. In this D2C model, by adding specific content or packaging, we can take a $5 product and convert to a $25 product while removing the retailer's margin. I would suggest you all look to add Quality Street and Tollbaron to your Christmas list this year. Sorry, this is one area I can't provide these for you for the next 12 months. Next is a really important area, delivery. And more specifically, THG delivered. This is an internally built clear label library. This type of solution is typically plugged in through a SaaS model. Our commerce clients get it for free as part of our solution. However, it extends way beyond that. Delivered connects over 1 TH95 different final mile delivery solutions accessed for our global network of fulfillment centers. Because of lessons learned in penetrating new markets, Our data scientists constantly analyze delivery performance, but also customer lifetime value by courier. We allow our customers to choose this service while reinforcing these options with data points. We all get the benefit of our group scale. It becomes a collective. As we grow GMV, we all get better pricing. Prior to 2020, we passed all delivery costs through to clients at cost. And consequently, this revenue is reported within the broader ingenuity category, not ingenuity commerce. In addition to our commerce clients getting access to this platform, it is now available as a standalone product. It can be plugged into any client's commerce platform or even their WMS solution, managing all elements of cross border trade, including taxation downstream from there. Again, If anybody listening just wants our courier label library, they can have it in the 1st 12 months for free because our cost to deliver is negligible. TH delivered feeds into orbit, which is our proprietary customer service interface. We provide the technology and run the call centers that handle all incoming and outbound customer contacts across all channels with over 34 languages covered. Additionally, we control all courier e mail communications to customers, branding them in accordance with client requirements. Courier tracking e mails link back to the clients' D2C website and not to courier platforms, adding more visits and revenue to the proposition. These small, 3 incremental revenue add ons make all of the difference in a complex global solution where there can be performance leakage at every point. Just managing this element of the service alone would be very complex for a brand owner across so many territories. Orbit revenues are reported within Ingenuity Commerce because their services directly apply to commerce clients, although a small element of the mix. So we're getting closer. We could all spend all day arguing who has the best tech, the best merch tools, best marketing tech, fraud checkout, the best fully integrated warehousing cross border fulfillment solution. But what's beyond doubt is that against all of those different competitor sets and TAMs, We are definitively the only solution that has built its own consumer brands to dominant global positions and in more than one category. We are foremost a brand builder and a brand curator. Any brand owner and retailer who's managed to solve putting together a complex cross border digital Solution, which is very few, now faces the greatest challenge of all, customer acquisition cost, repeat metrics and the ultimate nemesis, Marketing Cash Burn. CAC is the one question that seems to obsess the investor community and perhaps for good reason. It's one of the disciplines that THG has excelled in over the years, perhaps reflecting the disciplines and lessons learned when we were trying to survive selling CDs for a penny profit at a time. You could have a beautiful Bentley motor car in your drive, the best invested model, but without the capability to drive A feat of engineering such as that, it will become a millstone and digital history is littered with them. So So what is brand building? What is digital brand curation? It's these are content and data and how that interacts with trading and marketing techniques to cost effectively grow our loyal customer base and sales in multi territories globally. Without the technology and infrastructure, it cannot happen. TH. But equally, those assets are worthless without that capability. Content is at the center of customer communication. TH. We have Euro's best invested content production facility here in Manchester, which opened last month. Today, no content revenues have been reported in Ingenuity Commerce as this is a service that just hasn't been monetized. As we grow this capability in the new facility, this will form part of this reporting line. For a majority of our commerce clients, we act as a digital marketing agency and also provide trading and merchandising resource. These are skill sets that many brand owners and retailers just don't have. To continue the Bentley analogy, not only do we put the motor car in your drive, we will also fuel it up and drive it for you. Finally, let's talk about strategy. In the last quarter, we have recorded more revenue in assisting clients with go to market strategy than we delivered revenue in THG's 1st year. He's small now, but I know how this can grow. So why do organizations just go and replicate what we have here? We have invested over $1,000,000,000 in building this capability over the last 17 years. Anyone attempting to build this will find it obsolete way before the project completes. The Arnold Alternative is a complex, expensive conglomeration of many vendors across many disciplines. Assembling a solution riddled with cost and failure points with no single accountability for any of it. These types of solutions have been proven to lack resilience in times like this. Now that alternative solution will be for some, and I would argue that there are sufficient potential clients who want a solution that is inexpensive, quick to deploy, with single accountability and a platform proven to be world class. And if this isn't enough, they get comfort from dealing with a partner who's proven to be a world class digital brand builder in their own right. These factors combined maximize our clients' chances of success. TH. Brands. So how does our capability feed into a revenue model? This slide takes a previous graphic, lays it out flat and overlays where we charge and where we report these revenues. Firstly, I will run through revenue sources in Ingenuity Commerce. Given the breadth of services that we perform on a typical contract, The sources of revenue are extensive and layered. You can see the solutions we provide across the page with how we monetize in Engineered Ecommerce TH. Below those services, we show revenue that is captured in the broader Ingenuity segment. Technology fees will be charged for site build and ongoing platform licensing. These will be at a level consistent with entry level, single territory, flat e commerce engines, removing the capital barrier for complex global solutions, our specialty. All components of a world class web platform are included in this license fee, including merchandising and marketing technologies. The extensive range of services that we provide will be charged for as they are consumed by commerce clients. The commerce solution is cloud hosted, so this is picked up in the license fee. All hosting revenues generated are not from Commerce Clients and so are included in the broader Ingenuity reporting line, as is the case with Translation Services, unless derived specifically from a commerce client. As mentioned previously, fulfillment and delivery prior to 2020 were passed through at cost and so I've not been reported within Ingenuity Commerce. We will review the appropriateness of this in 2022 given the huge TAM and profit stream we see in this function. In addition to technology and service fees, as you would expect, We have an opportunity to monetize GMV and traffic running through the platform. We are partnering with a number of marketing tech providers and digital agencies on various commercial models, reflecting GMV opportunity directed to them. THG. Fraud screening via THG Detect is now charged on a transaction basis. We also partner with various payment providers on revenue share models. Perhaps the greatest opportunity here is a GMV take on both fulfillment and delivery solutions. The cost of these solutions for any DTC business combined can comprise circa 15% to 20% of GMV. And minimal take rate can become material to the model as fulfillment services revenue grows. As previously described, and I'm a reporter within Ingenuity Commerce at present. Given the unique proposition of Ingenuity and that we provide all services in 1 unified platform, sharing responsibility for proposition performance, Our return is largely based on an ongoing revenue share. This ensures that we are motivated to drive our client success. This percentage will vary enormously based upon the scale of the operation. The annuity in our model is the take rate on payments, fulfillment and delivery, all GMV driven combined with our performance based revenue share. Given the nicency of many of our client solutions, These latter sources comprise just less than 10% of reported ingenuity commerce revenue at present. Now I'll touch upon in the schedule is the potential to grow revenue streams from all of our headless solutions. We will come to that. Given the breadth of solutions and services that we provide in this model and also reflecting the multi territory approach in our proposition, we average 4 sites per client. We capture a large share of all digital wallet from our clients. This differentiates us from a typical technology peer and reinforces the multiple TAMs that we operate within. The growing demand for THG Ingenuity is reflected in the unique solution it offers to clients with no comparable solutions provider in the market with the same completeness of service or legacy in growing Own Brands TO Leadership Positions Globally. THG Ingenuity offers a frictionless and disruptive model. It removes the need for multi partner relations and minimizes upfront capital investment and enables margin efficiency. With less friction comes less execution risk and less of the client's time fixing complex problems and managing multiple vendors. The solution is also quick to deploy, given all elements of the service are fully proprietary and integrated. Clients can mobilize and scale across the globe at pace supported by localized infrastructure. Ingenuity's peer to peer expertise offers credibility to clients as a platform built by brand owners for brand owners. Having experienced many of the same challenges our clients face when moving online and scaling, Ingenuity provides the proven infrastructure to solve these problems. And with Ingenuity's brand ownership position, with online as the predominant channel of growth comes great digital proficiency. This capability spans all elements of e commerce and merchandising, digital marketing, data and content with an integrated approach across all of these channels. Because of these reasons, THG Ingenuity supports clients in maximizing their chances of success and mitigating their risk. There is no other solution in today's market matching THG Ingenuity, with alternative approaches leaving the brand owner with the burden of managing and orchestrating their own network of technology, payment, marketing, fulfillment, logistics providers, content creators, translators and so on. H. Before I pass back over to John to explain Ingenuity's growth model, it's worth referencing the Ingenuity partnership with Revolution Beauty, which listed on the London Stock Exchange in July 2021, a great example of taking a scale business from their core home market to a much larger global territory by way of the U. S, doubling GMV since launch and exceeding target by 38%. Here is a snippet from a discussion I had last week with Adam Minto, Founder and CEO of Revolution Beauty, about our partnership. Adam, can you tell us about Revolution Beauty and your digital growth strategy? H. Sure. So yes, Revolution Beauty, we're one of the fastest growing beauty businesses in the world. What we do is we create our own brands and create our own products, And it's a perfect playground for us digitally because we launch those products direct to our consumers each week on revolutionbeauty.com. H. As you know, there's been this big focus on digital pre pandemic, accelerated through pandemic. And I firmly believe the beauty Beauty, becoming more and more digitized. Yes, great. And what obviously, we've supported in the kind of international expansion of T. H. What are some of the initial challenges when you approached us as a partner? What challenges were you facing? Well, In how we create our products, we always think of the consumer first. So when we set about our digital strategy for revolutionbeauty.com, We obviously wanted to make sure we are prioritizing the experience for the consumer. And the best way to do that is to localize it. So as we were building our revolutionbeauty.com site, which is originally on sales force, we started to ship and fulfill globally. And we're shipping obviously fantastically to about 100 countries around the world very, very soon H. In our infancy, the challenge is the experience for the consumer in different countries wasn't right. So what we decided to do is follow our retail growth. H. So our 2nd biggest country in the world at the time, now our biggest in physical retail sales was the USA. And we started to think about how we're going to localize that. And that's really an extraordinary task for any business. You're a global company, but you're struggling to work out how you can get your operations global. Your consumers want your products, So how do you get your back end to meet that task? So when we were introduced to Ingenuity, the idea came that this was an ability Kia based in the reality of where that consumer lives and then add the back end, the challenge of fulfillment. H. And really that's been the advantage we saw as we approached the Ingenuity partnership, a fantastic localized experience, in particular with payment options For the consumer, time, the ability for that consumer to get that parcel fast and quick in market. And the challenge for Revolution was how we put all that together fast, and we've been able to plug into the Ingenuity system very well. Great. And suppose that perfectly summarizes really what the benefit end to end is within Ingenuity proposition and how it brings together all those different components, payments, fulfillment, brand building infrastructure, e commerce, trading, etcetera. And Revolution has benefited from that, Tx. Which is great, right? 100%, Pena. I mean, it's extraordinary building a business. And what Revolution needs to try and do is make sure it's concentrating on things that it does best, which is making sure it understands its consumer and what that consumer is wanting Today and what will it be wanting tomorrow. That's part of us building this fantastic global revolution brands and our product strategies of new categories Coming to that consumer, but I believe what we have with Ingenuity is a partner. So effectively, we're dividing and conquering. Our teams H. We work hand in hand with your team at Ingenuity to plan the best way to give the consumer the right TAH. The right product availability, the right service and the right strategy for Revolution to enter that market. So As you know, Hannah, we've already we first met, I think, in September of 2020. Yes. We started our first project very fast and launched in January of 2021, our U. S. Site and that's been a fantastic success. We're seeing well over Triple digit growth already in that first 9 months of the project. So fantastic results in what I believe H. Revolution's biggest retail sales in physical stores are already the USA. And I can now see the path for Revolution's biggest digital direct to consumer market being in the USA, I hope as soon as next year. And then we took another market in March, which was Australia, An area of the world that was impossible to fulfill obviously from the UK and that has been an even more exciting, I would THA Resolve. So we're up even last week, a 1000% growth year on year. Of course, we're annualizing against pandemic times when stores were shut in some cases. So fantastic results in Australia. Australia now It's our 4th biggest D2C market, closing in very, very fast on France in 3rd position. So we're very pleased with those results. Great. And I think to that point, it's the accelerated of new product development, right, that Revolution is bringing to market and how Digital has been a real facilitator of that and helping connect consumers really quickly to the innovation that you're developing. Revolution is a socially led Brands. We're one of the biggest beauty brands on social media. TikTok, we're the 3rd biggest beauty brand in the world. And what consumers want and expect H is being able to get that product fast when they need it. And obviously, the world of Amazon has meant that consumers really expect phenomenal service. So The partnership with Ingenuity allows us to give that localized experience. We now do simultaneous launches on our U. K. Global site onto our U. S. Site in Australia all exactly the same time. So we launch our products via our Instagram or TikTok page or an email, The consumer can buy it localized and get that delivery, most importantly, in a number of days. And I think the world has seen how H. Extraordinary shipping has changed, late post pandemic, the long COVID, as I call it. I'd love to have said that was the decision why we made to do that. I'm very grateful we made the decision. We thought of the consumer first In that decision making alongside our partnership with THG, localize the probes so the consumer can get their products fast at the right price at the right time. And now, of course, the challenges of global shipping mean that that was a very clever decision because We're not seeing those challenges of length of time getting from the UK to USA or Australia and cost. The cost H. Would have been extraordinary. And of course, Revolution isn't having any of those problems right now. Great. Well, thank you very much, Adam, for the TH. We think about growth across a number of pillars. TH. There's verticals or categories, low acquisition costs and low churn within verticals and categories. We're a mature, well penetrated geographical coverage business with product and service expansion, team expansion and growing GMV. We currently provide services within the following verticals. Beauty is our most penetrated, as you would expect. Food and Beverage, Nutrition and Wellness, Retail, Pet Care, Fashion, home interest. We've got Automotive and Garden Machinery, Media and Entertainment, Fitness and Sport. Given the flexibility and breadth of our solution, any vertical is open to us in any territory. None of our peers disclose churn rate, and this will be the last time that we do it. But for the record, in the last 12 month period, We have acquired 110 new clients and lost 2, 2 small clients. At the same time, our acquisition costs are minimal. This is all the more powerful given our typical contract breadth and length. This gives us payback in less than a month, meaning that our sales and marketing costs are a fraction of a typical peer, where you would expect these to run at circa 50% of sales. Geographical penetration. We are a globally mature and well penetrated organization. For example, Myprotein has over 55 fully localized international variants because it has scale maturity in those territories. The average number of solutions across our client base is currently 4. We are opening up the world's largest digital markets to our clients. Our top ten territories being served to clients at the moment are the U. K, the U. S. A, Germany, France, Spain, Italy, China, Japan, Hong Kong and South Korea with Russia just outside that list. These are not peripheral markets. We see no reason why any successful client cannot grow their presence to at least 20 territories over the next 3 years, just as my protein has done. I've gone to great and I feel painful lengths to explain the breadth of service provision we operate. We operate within too many times to attempt to listen. We continue to innovate product extension. The print on demand and personalization capability, our Ecos solution are just 2 of these. SaaS based headless products are now starting to monetize, including THG Detect, our fraud screen engine, our headless checkout, our courier library. Society is our influencer platform, a piece of technology that manages the complex supply chain involved in managing an influencer base of well over 20,000, all available to clients now. And I'm most excited about our solution development in fulfillment and logistics. Provision for warehouse management software above entry level and large scale manual or automated sites is poor. It forced us to solve this for ourselves with Voyager, which works in both extremes and anything in between. The collaboration with SoftBank and Autostore with the creation of First takes this to a new level, an out of the box automated solution. Issue today isn't even how expensive labor has become. It's a case of organizations not being able to source it at any price. Automation is the only answer. The traditional solutions are complex, expensive, time consuming with high failure relates. Our solutions solve this. Beyond that, we can wrap in checkout and translation upstream with global cross border delivery and customer services downstream. For small vendors looking for delivery solutions, the barriers are equally challenging. 3PLs and portal providers just won't even talk to these people, Giving them a subscale and too expensive to service, they have nowhere to go. For example, to optimally build a new warehouse, Similar to our best in class automated infrastructure would require around £80,000,000 of investment, which will deliver around £1,000,000,000 of GMV annually. A very simple take rate of 2% on fulfillment and 2% on delivery charges would yield huge savings to those micro merchants, well paying back around 2 years. The potential is vast and provision is pitiful. To headcount, rolling back 18 months, we had a business development team of just 3 people. This is now grown to over 70. Is anticipated to be at 100 by the year end. We have functions established in the United States and Australia. Given our really low cost of acquisition cost to lifetime value, we can continue to invest in this area without impacting on our profit and loss profile. Finally to GMV. Our end to end solution yields take rates at multiple touch points on substantial portions of GMV. In conclusion, our technology is already heavily invested with minimal variable costs to serve in either hosting or sales and marketing. So we removed the capital barriers to clients and still deliver a differentiated profit and loss profile. Our opportunity to build on that model via vertical, territory, product and GMV growth is unique. T. H. In response to the accelerated consumer shift to online and the associated benefits that the direct consumer relationship offers. The pandemic has driven an inflection point in e commerce adoption. More shoppers are buying online than ever before across all categories. Retail. As retail becomes increasingly consolidated, the need for brand owners to develop their digital offerings will continue to increase in importance. In addition, consumers are becoming increasingly comfortable buying online and are looking to take advantage of the great variety, convenience and information offered by e commerce, which drives growth broadly across all geographies and product categories. Consequently, the global outsourced D2C technology market within fast moving consumer goods is forecast to grow to £114,000,000,000 by 2023. Our track record in growing health and beauty brands makes this the most immediately addressable market, encompassing food and beverage in addition to household products. 3 and Beauty Retailers. We estimate the growth opportunity here to be £9,000,000,000 in 2023. Due to our increasing breadth, we believe that the revenue opportunity across other relevant industry sectors will exceed £30,000,000,000 which Ingenuity is able to address given the category agnostic nature of the platform evidenced by the diversity of clients we support today. Notably, our platform is increasingly in pursuit of becoming headless, as evidenced in the recent headless site launch for Mondelez Toblerone, launching in September 2021. As our proposition has evolved, our addressable market has further expanded beyond the end to end services market. Whilst the vast majority of our current clients have partnered with Ingenuity across the full end to end solution due to the convenience this offers, We see additional opportunities to deploy many of our products on a stand alone basis. These include, but are not limited to, Warehouse Management Solutions, Delivery and Courier Services, Digital Marketing Services and Checkout and Martech. We expect these markets to continue to grow underpinned by multiple structural tailwinds. I'll now hand back to John, who will talk through our real world asset infrastructure and Operational Capabilities. Is in part substantiated by the network of infrastructure we have built over the last 17 years to power the TSG Ingenuity platform. With over 300 localized websites driving an excess of £2,500,000,000 of GMV across our own brands and third party clients, with the former delivering 95% growth over the last 2 years. To support this ever increasing size and deliver best in class customer infrastructure, We have developed our robust network of nearly 200 localize couriers to support fast final mile delivery, 31 global data centers to support rapid site load times across the globe. 18 warehousing and fulfillment centers, now inclusive of fully automated and print on demand facilities, over 50 local and global payment methods, T H, 10 Product Innovation and Manufacturing Labs, 300,000 square feet of dedicated creative content production facilities with 3,600,000 square feet of fulfillment capability in build. And it is this global infrastructure that has supported clients like Hotel Chocolat, another great example of taking a scale business from their core home market in the U. K. In this instance to a much larger global territory with a U. S. THD2C Proposition, delivering upwards of 3 40% growth in their customer database since launch in October 2020. We announced a strategic partnership with the SoftBank Group, comprising a significant investment in THG Plc, alongside an option and collaboration agreement, which will ultimately facilitate a $1,600,000,000 investment into ChurchG Ingenuity. We announced some exciting partnerships at the time of our interim results, including First, and we continue to work on a diverse pipeline of opportunities. Upon completion, the investment will be deployed across areas, including future proofing our technology and physical infrastructure, investment in global automated fulfillment solutions M and A to improve our platform capabilities and building out TSG Eco, which will enable Ingenuity to provide chargeable services to clients, supporting their own sustainability goals. Growth has been very strong in the first half, with Ingenuity Commerce increasing 166%, consistent with both half 1 and the full year in 2020 despite the rising comps. The full ingenuity division grew 40% in half 1. The number of clients has increased over 5 hold since September 2020, growing to 140, with over 450 solutions now contracted for delivery through 2022. The timing here reflects our clients' roadmaps. In addition to the launching of these external clients, We have replatformed both Dermstore and Cool Beauty this year. Cool Beauty was replatformed within 10 weeks of acquisition. Additionally, our Voyager WMS was also deployed in the cult fulfillment center just yesterday. Our Our partnerships with clients are based on both parties being incentivized to grow. Hence, we work with our clients over multiyear agreements. This slide illustrates how our revenue base is evolving, with quarterly recurring revenue more than doubling year on year to quarter 2. To illustrate a typical maturity profile of a client over a 3 year period, you can observe from this graphic and how whilst overall revenue is higher in year 3 of a contract, the proportion of overall revenue recurring in nature is also much higher at 63%. In the first half of twenty twenty one, clients from prior year cohorts accounted for nearly 70% of Total Commerce Revenues, demonstrating that we are not just retaining clients, but also securing a much higher amount of their e commerce spend. It is also worth touching on our approach to investments into our platform and our approach to capitalizing costs, which is both consistent and appropriate for a proprietary platform and is also prudent when compared to a peer group of Similar Global E Commerce Businesses Based on Proprietary Technology. The efficiency of the ongoing investment in our platform is also demonstrated in the very low carrying value on the balance sheet, routed to the same peer group. Much of THG Ingenuity's value can be seen across a number of recent client case studies, whether that be supporting in a client's first full portfolio D2C venture, like that of Coca Cola European Partners, or delivering a major platform migration as seen across Homebase. Mobilizing at pace and delivering material GMV quickly THP can be seen throughout. Our partnership with Coca Cola European Partners marks the client's first full portfolio D2C offering, launching in October 2020 across the U. K. THG Ingenuity provided a flexible and sophisticated core commerce platform to deliver a unique and iterative customer proposition with product personalization, bundling, gifting and the launch of product adjacencies across complementary brands. The site has significantly improved accessibility of less well known brands within their portfolio, offering a marketplace shopping experience and has delivered accelerated GMV through the support of Ingenuity's e commerce teams. Through the use of Ingenuity's fulfillment network, proprietary warehouse management system, order tracking software and CRM software, the solution has eradicated customer friction points and supported in building a new and engaged online customer base. The partnership with Homebase is part of Ingenuity's strategy to expand into the retail sector and has seen the delivery of a major digital transformation project in 9 months, a program of work which will typically span 3 years plus. In this time, we have enabled Homebase to migrate away from their legacy in house technology platform, developing a dedicated product information management system along with opening up APIs to plug into Homebase's distribution center, allowing them to continue to fulfill from their own warehouse infrastructure. In addition, Ingenuity guided the digital proposition and customer journey through deployment of our consultancy services with ongoing support to trade and merchandise the website, generate relevant traffic through ownership of various performance marketing channels, deploy data insight to inform tactical and strategic decision making and deliver creative digital content to support all elements of the online purchase journey via THG Studios. The home based proposition launched in early 2021 and delivers a comprehensive customer journey through features including click and collect, advent search, flexible delivery and immersive content rich experiences, including shop the look, all powered by THG Ingenuity. Results from launch week. So initial traffic levels, plus 26% versus pre migration, testament to the robust SEO migration work and wider marketing TH. With revenues plus 50% versus prior year and exceeding targets by 100%. These strong results have sustained with average conversion rate plus 25% and our proprietary CRM infrastructure delivering revenues plus 110% versus the same period pre migration. The 3rd case study to highlight is Elemis, a category leading premium skin wellness brand owned by the Loxetan Group. Elemis partnered with THG Ingenuity in 2020 to accelerate the international rollout of their D2C propositions across Europe and Asia, complementing the existing D2C in the U. S. And the U. K. This partnership positions Elemis for long term international and digital growth, enhancing existing strength in channels such as specialty retail, Spa and Travel. Our digital partnership builds upon an existing product development and manufacturing relationship, which we have held for a number of years THG Labs. The partnership with Elemis has enabled them to fulfill their 5 year digital plan in 6 months, mobilizing quickly to drive incremental growth across a range of territories, including Hong Kong, Singapore and the Netherlands. The incremental results have seen Elemis increase their D2C targets by 27% with over 50,000 new customer records generated since launch. William Grant and Sons launched their multi brand site, clink.com, on the THG Ingenuity platform in Q3, 2021, further to brand development support provided by THG Studios. Following the launch, the client signed a strategic retainer with our digital consultancy Team to provide ongoing advisory support for the website. This involves advising on future international opportunities through appraising and validating market demand, delivering on initiatives to enhance the customer journey, inclusive of UX reviews and limited edition collaborations, and providing robust customer data insight and modeling to inform quarterly business reviews and upcoming initiatives to fuel future growth. This is one of the many examples of Ingenuity providing digital consultancy services and how they are being commercialized, adding value to clients to T. H. And here is what Dominic Parfitt, Head of E Commerce at William Grant and Sons had to say about the Ingenuity Partnership. Good morning, everybody. I hope you're well. My name is Dominic Parfas, and I head up our Global E Commerce Business at William Grant and Sons. For those of you who have absolutely no idea who William grandsons are, we're one of the world's leading family owned distillers and the owners and creators of some of the most amazing and dynamic brands within the spirits category. So brands like Glenfiddich, the Balbetti, Monkey Shoulder, Hendricks Gin, Tolomor Jew, Reika Vodka, Sailor Jerry's, Tramboury and the list goes on and on. So over the next couple of minutes, I'm going to talk to you about our TH. Our recent journey that we've been on to transform our global direct to consumer operations, which played a vitally important role in our global TH. So as part of this process, we looked at many different fulfillment partners and development agencies, but in the end, we landed on Ingenuity as a result of their extensive experience of building brands direct to consumer. The most desirable aspect for me of working with Ngenuity was the fact that the full tech stack already existed, so there was limited integrations and the opportunity for us to outsource the majority of the business to them, which is extremely beneficial, considering that we're just not THX. Considering that we're just not set up as a business to run a direct to consumer operation. So from start to finish, the team at ingenuity has supported us with the creation of the brand, but also the full end to end setup. And as a result today, we've got a brilliant foundation to build on for the future. Our platform went live back in June. And it's clinkspirit.com. Check it out. And the business has started to scale up, and we've had some unbelievable learnings so far. I'm really excited by what the future holds working with Intinuity because I think that they're going to help us to unlock growth across a variety of different areas, including marketing channels that we've never been exposed to 4 CRM and also building our capability around trading. Thank you very much. These four case studies should help to demonstrate T. H. The breadth of the Ingenuity proposition and the value it delivers to our clients. Not only do we strive to drive their digital growth, We are also increasingly focused on doing so in a sustainable way. We're an important part of our client supply chain and connectivity with their customers, which is why we embed sustainability across everything we develop and everything that we do through our carbon neutral platform. The group's Chief Sustainability Officer, Phil Pratt, will now take you through some of our ambitious goals and targets in support of our 2,030 strategy. Hi, everyone. You just heard our goal is not only to have the best e commerce platform, but also the most sustainable or green platform. But there's more to it than that. Today, we have published THG's 2,030 Sustainability Strategy, which has an overriding ambition to leave the world a better place than we found it. Our strategy is built on the foundation of solid business fundamentals. Over the next few minutes, I'm going to share with you what our key priorities and some of our key targets are full details are now available on our website. The strategy is focused on 3 overarching priorities: Protecting Climate and Nature, Strengthening Our Supply Chain of Circularity and Empowering People and Communities. Within protecting climate in nature, we are focusing on 3 goals. Our primary one, as you might expect, relates to climate change with an ambition to be climate positive, going beyond net zero and creating an environmental benefit by removing additional CO2 from the atmosphere. To that end, we've already committed to set and publish our own net zero science based targets in 2022. And I've also joined the Business Ambition for 1.5 Degrees C campaign. In addition, We commit to removing all the carbon we've ever emitted, either directly or through procurement of electricity since THG was founded. Our strategy, though, is not limited within our own business boundaries. We know we cannot address some of the major challenges facing all of us on our own, but also recognize we have the ability and the reach to impact and encourage our suppliers and partners to act. So we have set ourselves targets to encourage others to act as well. An example of this is for at least 50% of our suppliers and partners to set carbon reduction targets themselves by 2025. Our 2 other goals relating to protecting climate in nature are to have a net positive nature impact across all our brands and to use water sustainably across our value chain. Our second priority is strengthen our supply chain and circularity. Within this, Our first goal focuses on having an ethical supply chain focused on protecting human rights and eliminating modern slavery. Our second goal is focused on circularity and transforming all waste into resources. Key circularity targets are to have 100 percent of our own packaging being recyclable, reusable or compostable by 2025. To emphasize our commitment to this, we have recently joined the U. K. Plastic Pact. In addition, We aim to ensure 0 waste from our operations goes to landfill by latest 2,030. And we'll be aiming for 3rd party brands using our platforms to have 70% of their packaging either reusable, recyclable or compostable TH. Last, and by no means our least priority, is empowering people and communities with our goals focused on diversity inclusion, employee well-being and development and investing in our communities. Key targets supporting this priority are achieving 50% gender and at least 15% ethnic diversity on the Board and senior leadership teams by 2,030 eliminating gender and ethnicity pay gaps by 2,030 and providing 10,000 people in the community with tech and life skills training also by 2,030. So as you can see, our strategy is focused on 3 key priorities and achievement of 8 clear goals, which are vital for the long term sustainability of our business and equally important for the planet, our employees, our partners and the communities in which we work. In addition to the strategy itself, we are continuing to evolve THD Eco, which will be key in enabling us to deliver the strategy through services and solutions, such as our Recycle Me initiative, which helps consumers recycle difficult to recycle plastics Our More Trees platform, which enables B2B and B2C customers plant trees to sequester carbon and our 2 plastic recycling companies, which today already recycle in excess of 30,000 tons of plastic waste a year. To close, I'd like to reiterate these are an extremely important set of priorities and goals for THG that we have published today. Along with our newly announced commitments, this strategy formalizes and pulls together the excellent work that has already been taking place for several years across the group, and we look forward to sharing more developments on our strategy over the coming months. I want to thank you all for joining us today, and I hope that the comprehensive overview of THG Ingenuity has provided clarity on what we do for our clients, why they use us, what our revenues comprise of and where our growth comes from. Myself and the executive team featured today, and I look forward to taking your questions. Thanks again. TH THP. THP. We will now We will now take our first question from Markus Devel from JPMorgan. Please go ahead. TH. I had several questions, but if it's just limited to one, I would just ask T. H. On SoftBank, I guess, that's key for valuation of Ingenuity. Could you take us maybe a little bit more in detail about the timeline of this? And I don't know if you are in a position to talk a little bit about TH. Leon, on the time line now, that would be one of my several questions. Thanks, Marcus. It's Steve here. I'll pick that up. Just in terms of the time line, it's we're well inside what we guided to at the time that the SoftBank investment into PLC was made and the option and collaboration agreement was entered into. So yes, we I'd say we've got in excess of 12 months from where ahead of where we said we would be on timing. So We're coming in well ahead of timing in terms of being ready as a corporate for them to exercise their option. So expect that to happen TH1 next year. Certainly, that's how we're tracking, so high degree of confidence on that. In terms of just a reminder to everybody, at the time, SoftBank invested in PLC. They were also prepared to invest the €41,600,000,000 billion into Ingenuity. It was THG in terms of our corporate structuring that wasn't ready to receive Capital. Since that so we've created the option structure. Since that time frame in May, I personally am members of the wider team here. We're on daily calls with the SoftBank team or the investee companies. We've launched multiple partnerships Across the business and not least and quite significantly, I would say the Autostill Partnership collaboration relationship is super strong. And as far as shareholders go, we're delighted with them. Trading since we entered the option agreement with them in the Ingenuity business has been super strong. So for those reasons, we've got Maybe just as a follow-up, given the valuation today, there would be a scenario that potentially this option could be drawn earlier, yes, at potentially a different price. Is that something you would consider or is it really that you stick to the current plan in terms of timing and also effectively TH. The option prize or strike price, yes. I understand the question, but the reference price for the option is the agreement that we have with SoftBank for the valuation of Ingenuity. And all the Ingenuity has done since the time that that option has entered into is deliver and deliver more than we had at that point in time. The valuation won't change. That's the transaction. That's the option agreement that we've agreed with them. There isn't a read across into THG. It's about what is the value of Ingenuity. That's the entity they will own 20% of post the option exercise. Well, we couldn't do it sorry, this is Matt Moulding here. We couldn't do it any sooner in any event because We need the entity to go through all of its corporate plumbing. So, you know, should be transfers, Novation of Other Contracts and Agreements, which is what takes the time, systems and processes to make it a stand alone entity. So that's what drives the timetable as opposed to anything else. Okay. Thank you. We will now take our next question from Andrew Roth from Barclays. Please go ahead. THP. Great. Good afternoon, everyone, and thanks for taking the time, guys. That was a helpful presentation. My question is on fulfillment and payments, which, As I understand, you've been passing through 0 margin today. And if I did understand correctly, you're going to start to TH. Take rates yourself as of next year. Can you just help quantify that for us? So what is the kind of net take that THX. And what is the uplift in economics that you might get from existing partners when you make that change? Thank you. Sure, Andrew. John here. I'll take that one. Look, so think about it in terms of how it comprises against GMV in terms of the three elements. So typically, a Clearly, a merchant, transaction costs will cost typically 2% to GMV. If you think about warehousing And fulfillment, look, at the moment, that starts escalating. Depending on your returns rate profile, that can be anywhere between 5% 10% of GMV in terms of your warehousing costs. And then H. Again, dependent upon your international profile, delivery, I. E. Postage cost can be 10% to 12% of GMV. So effectively, what you've got is somewhere between 17% to 25% of GMV that any merchant will suffer in respect to those three elements. So then if you were to think, well, what would be a suitable margin against all of those elements? I think depending on There's different markets for fulfillment. If you've got a micro fulfillment client, as I described on the call, who is subscale, T. H. They can't even find someone to do the warehousing for them. In the U. K, the Royal Mail wouldn't even talk to them. They're too small. So there's opportunity there to save those types of merchants TH. We use the case that if we were just to take a 2% T. H. The numbers there can be vast and could pay back an €80,000,000 investment in 2 to 3 years. Look, so we think about it, perhaps a 30% 20% to 30% margin across those ranges GMV takes would be a good place to start. So I I think the answer to your question is it could be huge. Just to follow-up, you think your take It could be 2% at the GMV or you think it could be or 2% with a 20% to 30% margin? Sorry. It depends on the client. There's a huge range of potential clients at the moment, Andrew. So if you talked about a micro client for fulfillment, you can't actually get a provision at the moment, Then there's more opportunity for margin there. But I think as a standard fulfillment delivery model, we have the opportunity to just to add TH. A Tear Rat on all those services. And it will depend on the client, it depends on the scale, but it will also depend on the type of service we can provide. For warehousing, I mean, As I touched on the call, we could put just warehousing software into someone's warehouse and we could just run that for them. We could take a client perhaps and put them into our warehouse and do it that way equally, we could build an automated solution for clients. It's not just about the GMV tech as well. There's also the opportunity for software as a service across all of these elements. I think just fulfillment, there are some good models out there whereby providers providing to a checkout and do the end to end global e commerce delivery and get very good valuations from doing it and very good metrics. I I think the key to highlight is that's just a very small part of the service that we provide and one that at the moment isn't properly monetized. TH. Okay, cool. I mean, maybe just as a follow-up then, I mean, I think consensus has got about 50 ish million of revenues in T. H. Should we be thinking that the monetization of payment and fulfillment TH. Yes. At the moment, that doesn't as I said before, we've been treating fulfillment and postage is just a pass through item. There was some naivety of our model back in the earlier days. So majority of our clients actually get the service free. So TH. Okay. But just to be clear, though, in terms of how to think about that guidance, So the '90s already absorbed some expectation of monetizing payment and fulfillment or that there's potentially TH. Some conservatism that you had baked in around that, just to understand what's in that? No, there's nothing included in that 90 for those services. I see that as all upside potential in the THP. We will now take our next Question from Rob Joyce from Goldman Sachs. Please go ahead. Hi. Thanks very much. Good afternoon. So I've got a couple. I guess just to build on Andrew's question there. I mean, are you able to give us just a broad ballpark now on what you see the take rate potentially being if we take TH. The elements you just discussed, is it just a take rate range people can think about? And then following from that, I guess, if we look at this business now as a standalone entity you're going to THP. You're going to be presenting. I think previously you've talked about a 70% margin generally across the Ingenuity piece. But My understanding was that's because some of the cost was allocated elsewhere. Are you able to give us an idea of what the Ingenuity margin profile looks like as a standalone entity? H. And then just one follow-up in one of the slides. I think you mentioned a €30,000,000,000 revenue opportunity H. In the next couple of years, just wanted to be clear that's as the platform stands now and that is comparable to the 50,000,000 T. H. There are thereabouts consensus has in there for 2021. Thank you. Yes, look, so if you just talk it down through the composition of the P and L account and why we guided to TH. So in terms of the cost of sale, I think I pulled out one of the points in the presentation that we have our own hosting business. And so we don't have to suffer hosting charges to deliver services to clients. But in addition, and it's largely an out of the box solution. So our cost to deliver those services are very low. So we have a very high gross profit retained in that model. Then looking down into our expenditure. So typically, an e commerce payer would spend 50% of sales on TH Sales and Marketing Budgets. Now we've touched our churn rate is very, very low at the moment. And our acquisition rate is very high. So we're getting payback and these are typically long term deals with many services laid on top of each other. So the model is working very well and that's why we get such a high EBITDA retention rate. Okay, that's the 60% to 70%. Now in terms of take rates on fulfillment, as I mentioned before, fulfillment has largely been passed through with cost to date. We will have TH. Clients who will be prepared to pay different amounts of money, and that will come down to scale. So I'm not going to guide to any improvement in margin as TH. And the reason we see it as such a huge opportunity is, I mean, the world is screaming with pain at the moment in terms of an inability T. H. To get products delivered to customers, to get products put into warehouses, so there's huge friction at the moment. We have a solution that caters to that. And then that, to some extent, touches on your third point in terms of the TAMs that we address. So the key point to pull out there is that We're often compared to technology peers who provide very, very distinct services across a very small area of what we provide. So if you were to think about the various terms that we do address and the addressable markets that we address both geographically and elsewhere, then there's no limits on that. And that's the point we're TH. So we're not just providing an e commerce platform. We'll provide an e commerce platform that's got all the marketing technologies embedded, all the trades and merchandising tools that you will need. Alternatively, you can go and find a lot of solutions like that. And they have TAMs in their own respect. We then go through I'm sorry to repeat it, but I think the point needs to point out. We've got all the various fraud screening capability, the checkout, the fulfillment, the delivery, the studio work, the digital marketing agencies, we provide the people who run these websites. So there's a huge, huge potential, time for us to address. And that's reflected in the very high average revenue per client that we achieved. So I think the point we're trying to get across here is think about The full extent of the services that we provide when you're assessing goes, does that help in terms I can't answer directly on the €30,000,000,000 But Point is we address so many different potential TAMs. I guess the question on the €30,000,000,000 specifically, is that relevant is that GMV of what Clients of them are selling online? Or is that relative to the €50,000,000 revenue that comes to THG? No. These are the size of the markets Where we have the capability to penetrate those markets and take share from them, okay? So for example, Martin Technology has a TAM of its own respect. Fulfillment has a TAM, delivery has a TAM. There are TAMs all over the place that we address those particular markets. So the point we're trying to get across is We operate in many verticals, many territories, many products, which means that our overall addressable market that we can go at is vast. TH. And then one final one, sorry to spin off, please. But obviously, you mentioned that it's a very high margin drop through the minute because of you don't have spend that much on marketing, but given that material opportunity, do you think the opportunity is potentially to push more into the marketing to really educate people about this T. H. Yes. Look, I think we'd all hold our hands up here, so we've done a fairly Poor job of marketing ourselves, both corporately. And look, the fact that we've spent very little money on marketing, in that we get paid back TH. And most clients are on 3 to 10 year contracts. So it would suggest that we should perhaps press the accelerate button in terms of our marketing spend, yes. THP. We will now take our next question from Alastair Johnston T. H. From Kentisbury Capital. Please go ahead. Good afternoon, everyone. Thanks for the presentation. H. In your presentation, you mentioned having 10 Innovation Labs, and I presume Clermont Ingredients is one of those. That had a very, very good margin when it was acquired. Could you possibly just give some insight into that business in terms of The patents that it has or the specific IP which drove that very high margin. I mean, the key benefit, just to remind everyone, when we do any form of vertical integration play like that, It's around how it can deliver either synergies or it can product development or most likely both. So So not just Claremont, there was there's also Brighter Foods, which was around the bars manufacturing based out of Wales. And then there's a small business called Berryman's, which is a ready to drink business. And that's all about driving the brands that we have in Nutrition in terms of their product category expansion, but at the same time, driving synergies for us where that margin you talk about, we're paying to other brand houses, so we can bring that in house to do that. And so it's not necessarily that what we're buying there is any Specific IP per se, such as a piece of licensing tech or something like that, it's really around the capability that Gibsons in terms of developing flavors for all the different territories that we would need. So Clermont is all around flavoring, Bright is all around bars Trim, and Berryman is all around drinks, manufacturing. And those three things, it's all about the category expansion. H. So that's what drives those pieces of M and A. They're all quite small in terms of revenue, but it's about underpinning long term growth for our nutrition brands. Is that to say that the margin will kind of disappear, so to speak, when it becomes into the group? Or is there something one off about No. What we do is, we'd expect it to keep supplying external parties and so that margin stays as it was, then what it should then do is deliver incremental margin for THG. But what you wouldn't expect to happen is, is suddenly that those the revenues of those Small Businesses suddenly explode because we do we start serving more external partners. This is all about, yes, those revenues are probably going to stay somewhere Broadly where they were that it should contribute and help turn a cost center into a profit center and then deliver further synergies and product development Top. So it's about what it can bring for the long term, whilst maintaining what it had. Thank you. We will now take our next question from Catherine O'Neill from Citi. Please go ahead. Hi. Sorry, just to go back to the point about starting to charge on fulfillment postage, etcetera. I just wondered if you're having conversations TH. And then also just more broadly, I know during the IPO, You identified opportunities with SMEs and product type plug ins and talked about imagination. Dothful, I just wondered if you can provide an update on those initiatives. All new clients charge a margin on fulfillment and delivery. But I think the key point Beyond that is we're also talking to new clients about other potential solutions that we can provide for them. So I've got 3 ongoing now at the moment with a couple of major Global CPGs, but then a more low class digital business where they're looking at fulfillment solutions within their existing infrastructure. And in that respect, we can help them by putting either an automated macro solution or just even a manual WMS solution within existing infrastructure that they have. I think that reflects an evolution of their model whereby 18 months ago, perhaps they're wondering about DTC. Now that their thinking has moved on to, well, We're past that point. We now need to start thinking about how we use our existing infrastructure to get closer to our customers with our D2C Deliveries. I think that's a key point of evolution. But similarly, any online business that's reliant on The PPL at the moment, which is largely manual, will be suffering extreme cost pressure at the moment. The cost of those types of solutions are growing. As I mentioned, the provision for alternative solutions is really thin. And we know because we've been through it all. So we have the solution. We can give you a carbon copy of the facility we're just commissioning now in Manchester. And just to remind you all, this is an 800,000 square foot automated solution. We only entered the building in April. We've currently moved in now 8,000,000 units and we're shipping orders out and that's all within 6 months. And that kind of speed and automation just doesn't exist. And the reason it doesn't exist is because a normal solution, reliance on solution integrators, We do a selection of various software, various physical solutions, and it takes a long time, costs a lot of money, becomes complex. We have that solution. We have it at an automated level, be it for a micro site or a large site. We have a manual solution. TH. Put your WMS into any place you want. As I mentioned, we're commissioning called Beauty's warehouse yesterday and today with our own WMS in that facility. But TH. If that doesn't work for you, you're a small merchant and you've got no one that can do delivery for you, maybe you're moving out of your garage or your small facility and you're scaling up. It's very difficult for those types of organizations. So with the investment we're making, not only in our own warehouse and infrastructure, but also in the product, then we can cater to all of these different types of clients, be it microservices through to actually building you a solution, be it spoke to yourself because we've got the capability and we've got the experience of doing that. And because we control the software, we simplify it. Sorry, Catherine, there was another question. Yes. No, sorry. I was talking about also more broadly on your ingenuity commerce services. I think during the IPO, you talked about additional opportunities via imagination, Dottable you created in sort of specific separate plug ins. I just wondered and how you're progressing on that front or whether there's just sort of so much going on with the core commerce solution that you remain focused on that? No, well, a good example, I guess, of the product extension, both, in terms of the technology and the capability would be, I spoke about Toblerone and Quality Street on the call. So Quality Street is a confectionery brand of Nestle's. And we built a specific technology solution for that, which allows the customer to register their own name and effectively choose the types of sweets or candies that goes inside the product and also leaves a message in the cart. And that takes a specific piece of technology that we built specifically for that. But then it extends downstream into We actually provide the chilled warehousing environment where we store the product. We then keep the product. We put this the candy into the tin, we print the tin, we put the card in the tin, and then we manage the downstream services. And it's a similar operation for Mondelez with Air Tour Blurong, albeit in that instance, we don't provide any of the website you see, we just plug the checkout and the downstream capability that I've just described into that. So I think those THP2 as a kind of a vertical extension, but also an extension of the technology and the physical operation probably demonstrates your point very well. Since the IPO, clients now have access to the CMS and so can trade the platform themselves, H, which is a development versus September last year and increasingly seeing that across a number of new deals where Clients are definitely interested in deploying the platform, but wanting more control. Now the view is that, that is fully headless With no THG trading and merchandising support sort of mid next year, and that just draws back to your question on, I suppose imagination and jotable and that truly headless setup. The point that we haven't touched upon as well is things like the warehouse management proprietary solution being standalone and available to clients today. And to John's point, increasingly talking to a number of our current clients as well as new prospects really about deploying that product into their infrastructure. Okay. Thank you. Ashley, just one more point. Obviously, you're very excited about first given the tie up with Autostore. Could you maybe just Talk about what you see as sort of the execution risks around rolling that out and getting sort of clients to take up that solution? Yes. Well, look, I mean, I just described, so we're rolling out that solution of ourselves. And in 6 over the past 6 months, we've deployed that solution. And that was with an integrator assisting us with it because that was the only model. Now as we can engineer our software back into the automation solution, then the risk in deploying it anyway diminishes because we control it, and we control the interaction of the hardware and the software. So in that respect, I've got Absolute confidence in our ability to deliver it at many sizes, from a micro site through to the fully automated large scale sites. And it doesn't differentiate between category, product or geography in that respect. So just on that point, it is addressing an enormous market. And in terms of That concludes today's question and answer session. I'd like to turn the conference back to you, Matt Moulding, CEO for any additional or closing remarks. Well, thanks very much everyone. It's quite a lengthy session for people to dial into, so thank you for bearing with us. And we'll obviously have, I think, a Q3 update towards the end of this month that we put the details out there. So no doubt we look forward to speaking T. H.

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