Annual
Report
2022
AMBITION
LEADERSHIP
DECISIVENESS
INNOVATION
COLLABORATION
Revenue
Highlights
2022
2022
2022
2022
2021
2021
2021
2021
2020
2020
2020
2020
£2,239.2m
£2,179.9m
£1,613.6m
Adjusted EBITDA
£64.1m
£161.3m
£150.8m
Adjusted EBITDA margin
2.9%
7.4%
9.3%
Reported operating loss
£495.6m
£137.5m
£481.8m
Strategic progress
• THG Ingenuity gaining momentum following the pivot to
focus on higher value and ultimately higher margin contracts
• Successful completion of the divisional reorganisation
with cost savings and efficiencies implemented in FY 2022
• Simplification of the Group leading to a strategic review
of loss-making categories and territories, underpinning
FY 2023 profitability improvements
• Strategic partnerships and alliances entered into across
THG Beauty, THG Nutrition and THG Ingenuity
Financial performance
• Record sales of £2.2 billion
• Significant investment in price strategy impacting
gross margins to support long-term customer retention
• Lower level of profitability due to challenging
macroeconomic environment and significant
cost inflation across major cost lines
• New £156 million term loan further strengthened the
balance sheet with c. £640 million of cash and available
facilities at year end
THG Awards
Chair’s Introduction
Chief Executive Officer's Review
Company Overview
Our Business Model
THG Beauty
THG Nutrition and Wellness
THG Ingenuity
Chief Financial Officer Review
Section 172 Statement
Stakeholder Engagement
Non-Financial Information Statement
Sustainability
Task Force on Climate-related
Financial Disclosures
Risk Management
Directors’ Report
Contents
Page 3
Page 5
Page 8
Page 13
Page 21
Page 26
Page 32
Page 37
Page 47
Page 55
Page 57
Page 79
Page 83
Page 97
Page 105
Page 123
Page 130
Page 133
Page 138
Page 141
Page 144
Page 159
Strategic Review
Matthew Moulding
Chief Executive Officer
"With a strong balance sheet and category leading
positions within substantial end markets that continue
to benefit from long-term structural growth, we have
confidence in our ability to deliver long-term value for
shareholders.
Our entrepreneurial culture is prevalent across the
organisation, with our people rising to the challenges
presented to them during the year with resilience and
tenacity, with high-performing, diverse teams being
central to our ongoing success."
#1 CIO in the UK
(Joanna Drake)
CIO UK 100 Awards
Contact Centre Support
Team of the Year
(Silver) (Group)
Call Centre Management
Association Awards
10
th
in Top Customer
Service Experience,
Non-Grocery Retail
(Lookfantastic)
KPMG Customer
Experience 2022
Most Exciting
Partnership
(Hotel Chocolat X Myp)
European Specialist
Sports Nutrition Alliance
Winner in the
Shopping App
Campaign category
App Growth Awards 2022
Click here to watch our review of the year
Governance Report
Governance Report
Audit Committee Report
Risk Committee Report
Nomination Committee Report
Related Party Committee Report
Sustainability Committee Report
Directors’ Remuneration Report
Financial Statements
21
Annual Report 2022
Chair's
introduction
Introduction
Welcome to our 2022 Annual Report. Having been
appointed just over a year ago, I am delighted to have
had the opportunity to get to know the business over that
period and remain highly impressed with the talent and
culture which is evident throughout the organisation.
The past year has been marked by a number of external
challenges – from Covid-19 and its various impacts still
lingering in certain territories, to rising inflation and the war
in Ukraine. And whilst these external factors have impacted
consumer confidence and added inflationary pressures to
our cost base, the management team have worked hard to
mitigate their effects, pivoting to focus on cash generation,
strengthening the balance sheet, reducing costs and, in turn,
delivering a robust set of financial results.
More than that, though, these past 12 months have been one
of change and development for THG. I joined the Group as
Chair with a clear mandate: to strengthen the governance
and with Matt Moulding, the Group CEO, review and refine
the Group’s strategy. We have refreshed THG’s Board and with
Matt, developed the management team. There is still more to
do but we’ve made significant progress as I will set out below.
Board composition
and management
We continued to strengthen our Board composition during
2022, seeking to enhance the skills, experience, knowledge
and diversity and were pleased to welcome Dean Moore and
Gillian Kent as independent NEDs in September 2022, both
of whom bring significant experience and insight from their
previous industry roles. Following a review of THG’s leadership
needs, we announced two changes to the Executive
Leadership Team at the beginning of 2023 – the appointment
of Damian Sanders, former independent NED and chair of
the Audit Committee, to CFO and the appointment of John
Gallemore, the incumbent CFO, to COO.
During 2022 we also saw Dominic Murphy, Tiffany Hall,
Zillah Byng-Thorne and Dr Andreas Hansson step down
from the Board and I, together with my other Board
members, would like to thank them all for their valuable
contributions during their tenures with THG. Further
information on the Board changes which took place during
2022 can be found within the Governance Report and the
Nomination Committee Report.
Organisational development
In July 2022 we announced the legal completion
of the internal separation of our key trading Divisions,
an important landmark in the continued development
of the Group and a significant undertaking that was
completed on track and on time. The Board believes
that this separation provides material optionality and
flexibility for our key trading Divisions to enter into future
strategic partnerships, generating value accretion for all
shareholders. As you will see from our published accounts
for FY22, the separation allows us to report on a divisional
basis (with comparative figures for FY21 provided also),
adding a new level of transparency to our financial reporting,
and providing the opportunity to demonstrate the true value
of our three world-class businesses: THG Beauty,
THG Nutrition and THG Ingenuity.
People and diversity
Our values, culture and people have, collectively, allowed
us to make substantial progress against our strategic priorities.
The Senior Management team has demonstrated its
experience and keen ability to drive progress, and I have
been pleased to see the impressive work undertaken across
all our operating Divisions, as they grow and expand their
respective customer and client propositions.
Our ambitions to drive sustainable, profitable growth and long-
term value creation are supported by a dedicated and diverse
workforce. Retaining and developing talent is a key priority for
THG and we empower our colleagues to make a difference.
During 2022 we set out to add a fifth Company ‘value’ –
alongside Leadership, Innovation, Decisiveness and Ambition
– and were incredibly pleased with the level of engagement
from our global colleagues who overwhelmingly suggested
Collaboration as the value most reflective of their THG
experience. This selection is testament to the central place
that collaboration plays in the culture of THG, from how we
view our relationships with each other as colleagues, to the
partnerships we form with our clients to drive mutual success.
Stakeholder engagement
As Chair I have been fortunate to spend time with many
of our shareholders, particularly consulting on their views
when the Board was appraising the bid approaches
received during the first half of 2022. As we announced
to the market at the time, the Board was unanimous that
the offers were unacceptable and significantly undervalued
the Company. I have listened to Shareholder feedback
and have begun to implement positive changes to our
engagement and communications strategy which will
continue over the course of 2023.
Continued strategic delivery
Against all this, we have continued to execute our strategy
successfully and have done so whilst continuing to invest in
our future growth, rolling out fulfilment and manufacturing
infrastructure around the globe, ensuring we are well-
placed in our key territories to meet the growth demands
both of our own-brands and of our Ingenuity clients.
Our Divisions have established meaningful positions in their
respective markets and we continue to refine their strategic
focus, ensuring they are well-tuned for continued delivery
for all stakeholders. THG Beauty and THG Nutrition remain
relevant to a global consumer base who are living longer,
more digitally connected lives than ever before.
Following a change of leadership, THG Beauty is exiting
certain geographies, simplifying the offer and focusing on
higher margin products. THG Nutrition has undertaken a
strategic reframing, further diversifying from its traditional
protein-based product focus and broadening its offering to
deliver for the entire ‘wellness’ market.
This is all powered by our technology and physical
infrastructure platform, THG Ingenuity, which continues to
deliver for our stakeholders – whether they be customers,
consumers, clients or strategic partners – working with
them to support and deliver their digital commerce
journeys. Throughout the year it has gained momentum
as its strategic pivot to focus on higher value and higher
margin contracts has begun to bear fruit. Following
a detailed review of each of our divisions we have reduced
the headcount and attracted and retained the best talent.
Sustainability
As a business we are committed to driving environmental
and societal change, both through our own operations and
as a key partner for our stakeholder groups. This is driven
by our 2030 Sustainability Strategy, ‘THG x Planet Earth’,
which details our goals and targets as we pledge to use our
global scale, world-class talent and dedication to innovation
to act as a force for good.
In 2021 we invested in building our recycling capabilities,
and during 2022 we broadened the services we provide to
our Ingenuity clients through THG Eco. When it comes to
sustainable development, we understand that real impact
requires collaborative, coordinated and collective action
between businesses, the public sector and individuals.
THG Eco, part of THG Ingenuity, supports our clients,
partners and suppliers in navigating the changing
environment and demonstrating to their own suppliers
and employees their sustainability commitments.
Looking ahead
2022 saw THG – together with almost all businesses – face
inflationary challenges from a range of sources, from the
cost of raw materials, to labour, to operational fulfilment
and energy. In both facing, and trying to mitigate these
challenges, we have kept a firm focus on what sits at
the heart of THG: the customer; and, in recognising the
pressures faced by consumers globally, we made the
decision not to pass on the full extent of inflationary cost
increases to our customers. We believe that this strategy
will secure customer loyalty, retain customers within the
THG ecosystem and in turn deliver market share growth
in key territories over the longer-term.
Looking to the current financial year, I believe our category
leadership positions, our culture of innovation, our dynamic
Senior Management team, our well-invested global footprint
and our robust balance sheet will, collectively, ensure we
are well placed to deliver further growth and capitalise on
strategic opportunities at the appropriate time. All with the
ultimate goal of delivering shareholder value.
The Group’s intention to apply for a Premium Listing
remains and we are well prepared internally to progress
upon completion of the FCA’s ongoing review of the current
listing regime.
This past year has been one of change and development
for THG, and I am enthused by the prospects that lie ahead
for us as we further progress our strategic priorities in 2023.
Charles Allen,
Lord Allen of
Kensington CBE
Independent
Non-Executive Chair
Further information can be found within:
Chief Financial Officer Review
See page 37
Section 172 Statement Stakeholder Engagement
See page 47
Sustainability
See page 57
Governance Report
See page 105
3 4
Annual Report 2022
Chief Executive
Officer's Review
Matthew Moulding
Executive Director
and Chief Executive Officer
Dear Shareholder
2022 was unquestionably the most challenging global
environment we’ve seen since founding THG nearly 20
years ago. An extraordinary backdrop of runaway inflation,
rapidly rising interest rates, and major geopolitical events
created significant macroeconomic and consumer
uncertainty. I’m incredibly proud of how THG and the team
responded to these challenges. For me, there is no doubt
that 2022 was our best performance to date, even given
the reduction in profitability year-on-year.
THG almost doubled in size during the global pandemic,
capitalising on an unprecedented movement of consumers
to online retail. As consumer behaviour has normalised,
the Group not only held onto the growth achieved during
the pandemic but went on to grow further during 2022.
This growth in market share, delivered in the most trying
of circumstances, is testament to the quality and dedication
of our people.
From the start of 2022, the Group and divisions alike
undertook decisive action to adapt their business models
to a very different market landscape, while maintaining
revenue growth in the process.
• Our Beauty and Nutrition divisions committed to
shielding consumers from what we believe to be
exceptional, short-term inflationary pressures. These
actions temporarily reduced gross margins and
profitability year-on-year, with the long-term benefits
to brand integrity underpinning stronger customer
loyalty and financial reward.
• After a careful and lengthy search, Vivek Ganotra joined
as CEO of THG Ingenuity in June and was tasked with
repositioning the division away from smaller, high-volume
clients, to focus resources on our growing base of
valuable, large scale, enterprise clients.
• The previous 48 months have seen significant expansion
of our global fulfilment and manufacturing infrastructure,
with each facility requiring a full depth of stock holding
to become fully operational – which is now rationalising
as evidenced through the working capital inflow in the
year. This strategy has driven an improved service for
consumers in international territories.
• In July 2022, we announced the completion of
the divisional reorganisation, increasing strategic
optionality for the future. The divisional reorganisation
has also yielded improved visibility of costs, enabling
savings to be made from reducing duplication and
greater focus. The project was very comprehensive,
and we are well on our way towards broadening
our financial reporting to better reflect the divisional
performance.
• Group headcount reduced by almost 2,000 people
during the year, largely achieved through the careful
management of attrition as well as maintaining strong
cost discipline and the roll-out of logistics automation.
• To strengthen our liquidity, we agreed a new £156
million banking facility, resulting in the Group having
over £640 million of cash and facilities at the year-end.
Net debt of £181 million was better than guidance of
c.£200 million.
• The Group’s Board also underwent some changes,
with the appointment of Lord Charles Allen as Non-
Executive Chairman, and the subsequent appointment
of two Independent Non-Executive Directors.
We see the Group being well progressed to deliver positive
free cash flow on a rolling 12 month basis through FY 2024,
via ongoing project delivery efficiencies including driving
working capital improvements, while not compromising
our ability to meet growing demand and deliver top-line
revenue growth.
Market outlook
Our Beauty and Nutrition divisions operate in large,
resilient and expanding total addressable markets,
with each holding prominent positions in many territories.
There are long-term trends driving category growth in our
core markets (premium beauty, health and wellness), where
we have the infrastructure and capabilities to serve following
investment in our fulfilment and distribution network.
Both our core consumer markets continued to grow
through the previous global financial crisis, and over
the last decade benefitted from the exceptional growth
of online participation. For example, the UK online share
of total retail sales has increased by more than 25% over
the last three years – now accounting for around 25%
of total retail sales.
Our key categories are supported by favourable dynamics,
such as high repeat-purchase rates, stable average order
values and very low return rates. This presents THG with
opportunities to grow within existing markets, and in
targeted new markets where we will be able to rapidly
scale up our presence.
Customer proposition
One of our greatest assets is our global customer base
of over 16 million THG Beauty and THG Nutrition active
customers. Our apps have been downloaded over 10 million
times from a standing start in January 2020 with our first-
party data advantage a core strength in our model, allowing
us to hold direct relationships with our consumers.
The insights gained from these customers informs our
daily decision making, and we are investing in growing
this network of passionate, engaged beauty and wellness
enthusiasts – firmly positioning us as the market leader
in this space.
We are constantly striving to become more efficient as an
organisation, while optimising the customer experience and
minimising delivery times. Through our brands, we have
reimagined how we think about beauty and nutrition – and
how this integrates into our daily lives as we increasingly
look to improve our overall health and wellbeing.
Divisional highlights
I'm pleased with the progress achieved within Ingenuity
as we pivot towards a longer-term view for sustainable
profitability, supporting major UK and international retailers
across a wide range of categories, further supported by
our expanding network of partners and strategic alliances.
THG Beauty is now firmly established as one of the
leading pure-play online retailers globally delivering
over £1.2 billion of revenue. We have set a pathway to
rebuild margins in our largest division through a focus
on profitable territories, efficient marketing channels
and improved localised procurement.
THG Nutrition witnessed one of its most challenging
periods in recent times and consequently I’m delighted
that we delivered revenue and market share growth across
many key territories, in addition to expanding our category
reach with new and innovative partners. Our customer
base has remained stable, notwithstanding a higher-pricing
environment and physical stores reopening, supporting the
defensive position of our brand.
Following the strategic investments made through
acquisitions during 2021, we have continued at pace
with our integration plans, prioritised customer retention,
revenue growth and cost efficiencies by reducing
previously-outsourced operations. The investments
made in nutrition innovation and production facilities
have allowed us to accelerate our speed to market,
as we continue to expand our range across categories
and markets.
Financial performance
Group revenue increased by 4.1% during the year across
core divisions (THG Beauty, THG Nutrition and THG
Ingenuity), including a contribution from acquisitions
within THG Beauty. A credible result considering the
major events that have impacted the global economy,
and compared to the prior year where the pandemic
continued to impact access to traditional retail channels
resulting in a tough comparable period.
The cost environment in 2022 has been unusual, with
high inflation across most cost lines and foreign exchange
headwinds applying pressure to margins. Whey costs were
unusually elevated which has compressed gross margins
in THG Nutrition as we have sought to protect customers
and invest in retention and growth for the longer term.
We have been encouraged by demand in a higher-pricing
environment, with strong repeat purchase rates from our
loyal customer base of above 80%.
This strategy has driven an improved service for
consumers in international territories. As we approach
completion of this fulfilment network investment, we are
well positioned in major territories to meet the growth
demands of our own-brands and our Ingenuity clients.
We continue to move towards increased automation in
our major hubs, driving distribution cost efficiencies for
the Group to help offset inflation.
Whilst we have reported a significant non-cash impairment
charge relating to Beauty and Ingenuity, this is a one-
off item relating to a combination of rising interest rates
leading to a higher discount rate, combined with other
macroeconomic pressures resulting in an impairment
of historic goodwill balances.
Core commodity prices used within our Nutrition division
have already seen significant deflation since their record
highs in 2022, giving us confidence in our ability to rebuild
divisional margins to previous levels. In addition, we have
taken measures to further improve profitability by exiting
certain loss-making categories which are discussed
in more detail in the CFO report.
Our strong liquidity position following the cash inflow in
the second half of the year, including the new £156 million
banking facility, means we are well positioned for further
operational and strategic progress, notwithstanding the
continued macroeconomic uncertainty.
5 6
Annual Report 2022
People and purpose
As THG evolves, we recognise that we must review our
purpose, vision, and values to ensure they align with our
strategy and reflect who we are, what we do, and why we
exist. Our purpose and vision reflect the diversity in our
business model and the impact we can drive through our
innovation and digital expertise. Based on our success
building THG Beauty and THG Nutrition into category leaders,
we remain committed to reinventing how brands connect to
consumers globally and supporting them to be best-in-class
at building, growing and accelerating brands.
In 2022, we submitted our emissions reduction targets to the
Science Based Targets initiative (SBTi) for validation - this is
an important step towards our goal to achieve net zero
by 2040. We also source 63% of the electricity used in our
operations from renewable sources and we are on track
to reach 100% by 2025. We have continued to make good
progress across the people and communities pillar of our
THG x Planet Earth Sustainability strategy and are proud that
we have 45% female and 26% ethnic minority representation
within our Graduate and Apprenticeship schemes, against a
target of achieving 50% and 20% respectively by 2025.
Our people are the heartbeat of THG, and I was exceptionally
pleased to reward some of our loyal and talented colleagues
with share awards during the year totalling c.£19m across 33.9
million shares, in addition to a number of promotions as we
continue to invest in and develop digital talent.
Finally, I’m particularly proud of THG’s contribution
to the communities in which we operated during 2022,
in terms of both taxes and charitable efforts. In the 18th
year since founding THG, the Group made a record global
tax contribution of £153.4m, up from £123.4m in 2021.
The contribution in 2022, from starting THG less than 18 years
earlier, shows the importance of start-ups to the UK economy.
Outlook
With the completion of the divisional reorganisation,
and decisive cost reduction action undertaken, the
Group enters 2023 with improving momentum to
achieve substantial margin expansion. Earnings recovery
is supported by continued operating leverage, reducing
consumer price protection, and the full-year effect of
operating efficiencies and cost savings arising from
the divisional reorganisation.
Our vertically integrated model enhances our ability to
react to periods of economic uncertainty, and the profit
improvement initiatives undertaken as part of the strategic
review give us added confidence in driving margin recovery
in 2023 and beyond.
We are well capitalised to advance our strategy of building
a strong, sustainable global platform supporting THG
brands and Ingenuity clients, and we have outlined
our core levers for driving margin accretion and positive
free cash flow over the near-term.
We remain confident that our business is underpinned
by strong investment and strategic growth plans which
will drive long-term value for our shareholders.
Our simplified vision – to create and grow category-
leading brands on a global scale – encompasses
all areas of the Group and defines our ambitions
for the future.
As THG evolves, we recognise that we must
review our purpose, vision, and values to ensure
that they align with our strategy and reflect who
we are, what we do, and why we exist.
Our purpose
and vision
Making an impact is what we do; it’s why we
exist. We strive to make an impact for our
people, our customers, our Ingenuity clients,
our suppliers and partners, our shareholders,
and our communities.
Our purpose is to
make an impact through
digital transformation,
innovation, and expertise.
O
ur vision is to create
and grow category-leading
br
ands on a global scale.
We identified three things as enablers to our impact:
digital transformation, innovation, and expertise.
Through Ingenuity, digital transformation creates value
for our stakeholders as it improves efficiency, enhances
the customer experience, and increases agility. Our
innovative and entrepreneurial mindset allows us to
develop new products, enter new markets, and find
solutions to challenging problems.
Finally, we take pride in being experts in what we do
and use our expertise to make bold decisions and
deliver bigger and better outcomes for our stakeholders.
Our previous purpose – to reinvent how brands
connect digitally to consumers – remains true and is
encompassed in our new purpose; we reinvent how
brands connect digitally to consumers through digital
transformation, innovation, and expertise.
8
7
Annual Report 2022
We think big
We set ourselves ambitious goals,
seeing opportunities where others see
obstacles. We take pride in our work and
view our setbacks as valuable learning
experiences. Our progressive mindset
allows us to deliver better outcomes for
our people, our brands, our clients, our
customers, and our communities.
We do things differently
We celebrate experimentation and champion
entrepreneurial thinking. We find solutions,
not problems, and use our creativity and
resilience to drive continuous improvement.
We lead by example
We inspire, motivate, and encourage each other
to push the boundaries of what is possible. We
set a positive example and promote a culture of
meritocracy so that everyone at THG, no matter
their background, age, or experience, has the
opportunity go further, faster.
We work together
We share ideas, insights, and skills to
create a meaningful impact and drive
positive results for our business. We listen
to each other, we trust each other, and
we strive to create an environment where
everyone feels heard.
We make bold decisions
We use robust data to make quick, informed,
and confident decisions. We take calculated
risks and we’re not afraid to take accountability
for our actions.
We’re incredibly proud to celebrate our diverse
workforce and the unique experiences, skills,
and qualities everyone brings to the table.
However, there are a few attributes that
we all share.
THG colleagues captured at ICON Studios. Q1 2023
Leadership
Innovation
Decisiveness
Ambition
Collaboration
Our values
01/
02/
03/
04/
05/
9 10
Annual Report 2022
Our strategy
Our Stakeholders
Medium-term Financial Priorities
Build category leadership
positions in beauty,
health and wellness
Accelerate growth in core
international territories,
leveraging our local
infrastructure
To make Ingenuity the
partner of choice for
commerce transformation
and sustainability solutions
Drive positive change
with our stakeholders,
through an entrepreneurial,
values-led culture
Deliver engaging content
and innovative products to
our global customer base
Market-share
growth
Return to historical
adjusted EBITDA
margin of 9%+
We have built a strong, global business. Investments
made to date support further sustainable growth,
creating value across our key stakeholders.
We enable brands to have direct
relationships with consumers
by providing a high-quality retail
experience and establishing
a relationship of trust
We create value for
shareholders and through
our purpose, vision, values
and strategy, deliver long-
term, sustainable growth
We aim to ensure THG is a
supportive environment with
career development opportunities
at all levels, focused on building
the skills of tomorrow
We aim to build skills and
develop talent to promote
greater social mobility, whilst
protecting the environments
we operate in and source from
We support clients
on their digital
transformation journeys
We promote open and
transparent working practices
and collaborate for mutual
commercial success
Customers
and Consumers
Shareholders THG Ingenuity
Clients
Our Suppliers
and Partners
Our People
Society
& Communities
Our
Stakeholders
Revenue
growth
Strong
balance sheet
Free cash flow
generation
Strategic Priorities
For further information please see the following sections: THG Beauty, THG Nutrition, THG Ingenuity,
Chief Financial Officer Review, Section 172 Statement Stakeholder Engagement.
1211
Annual Report 2022
Our business model
A powerful portfolio of
category-leading consumer brands
focusing on beauty and nutrition
Accelerating D2C brand growth
on a global scale via proprietary
e-commerce infrastructure
Divisional revenue Territory revenue
UK
43%
USA
20%
RoW
17%
Europe
20%
Beauty
55%
Nutrition
30%
Ingenuity
7%
Other
8%
20222022
13 14
Annual Report 2022
THG operates under three core divisions: THG Beauty,
THG Nutrition and Wellness and THG Ingenuity.
Myprotein, the world’s #1 direct-to-consumer sports
nutrition brand and its brand family, offering products
across several associated categories, including protein
and sports nutrition, vegan alternatives, health snacks,
vitamins and athleisure.
The #1 online pure-play prestige beauty retailer
Lookfantastic, and several other popular online
prestige beauty retailers.
A portfolio of eight owned digital-first prestige
brands addressing primarily skincare, haircare
and cosmetics.
Proprietary complete e-commerce platform that powers
digital experience and retail for FMCG, beauty and retail
brands globally, creating a seamless experience for
consumers.
Clients can purchase end-to-end or modular services
to meet their needs, drawing on the Group’s digital
brand building capability, extensive proprietary
e-commerce technology and physical infrastructure.
As well as being a third-party e-commerce solution, THG
Ingenuity is the operational infrastructure and digital hub
which supports THG Beauty and THG Nutrition, delivering
excellence throughout the supply chain and customer
experience. THG operates a vertically integrated model,
allowing the Group to control the entire customer journey,
from design, manufacturing, product education and
discovery, to purchase and fulfilment.
Its capabilities sit within three sub-divisions:
THG Technology
Since inception 18 years ago, the Group has continually
invested in building its own e-commerce software
specifically designed for the retail of consumer goods
globally. Solutions include the Group’s highly scalable
enterprise platform that powers e-commerce for brands;
hosting infrastructure ranging from dedicated servers and
cloud hosting to managed services; fulfilment technology
including warehouse and delivery management systems
and warehouse automation; and fraud management and
detection software.
• Warehouse
Management System
• Climate action
•
W
aste reduction
• Recycling
•
E
SG data & performance
• Re-forestation
•
St
rategic GTM consultancy
•
T
rading services
•
B
rand partnerships
•
P
erformance marketing
CORE COMMERCE
PLATFORM
CLOUD SERVICES
THG Operations
Encompassing global fulfilment from a network of sixteen
warehouses in strategic locations across the world,
manufacturing of nutrition and beauty products in owned
and operated BRCAA/A grade facilities in the UK, US and
Poland, customer services and sustainability solutions from
carbon offsetting and consultancy to plastic recycling.
THG Digital
THG’s integrated marketing ecosystem brings together
digital marketing, media, creative content production,
translation and digital services to create a holistic,
data-driven digital marketing strategy across channels,
driving scalable and cost-effective customer acquisition.
STUDIOS
SOCIETY
FLUE NT LY
GLOBAL FULFILMENT
MANUFACTURING
ECO
• Courier management
•
F
ulfilment Inventory Retrieval
& Storage Technology
• Customer experience
VOYAGER
DELIVERED
FIR/ST
ORBIT
OTHER
Other divisions
THG Experience, three luxury event spaces: King Street
Townhouse Hotel, Great John Street Hotel, and Hale
Country Club & Spa, providing bespoke luxury spaces
for hosting influencer and brand events for both THG
and third-party brands.
THG Luxury, the online retail of over 200 fashion and
lifestyle brands, including the websites Coggles.com,
Mybag.com and Thehut.com.
From 1 January 2023, THG Experience and THG Luxury
will be reported within the THG Beauty division.
THG OnDemand, entertainment products and subscription
services for clothing, gadgets and vinyl, with a focus
on personalisation and licensing arrangements with
global publishing houses. THG OnDemand was under
strategic review at the year end. The strategic review is
now complete and the Board has subsequently decided
to discontinue the operations of this division. See more
information within the CFO report.
15 16
Annual Report 2022
Our marketplace
Market description
THG Nutrition’s total addressable market, including the
sports nutrition, vitamins, weight management products
and sportswear categories, is estimated to amount to £350
billion globally. THG Nutrition’s core focus is on the sports
nutrition market, which is estimated to amount to £17 billion,
however the focus has been expanded in recent years to
address wider segments of the global nutrition market.
Products
THG Nutrition’s products span a number of categories
of the global nutrition market, including protein powders,
supplements, vitamins & minerals, bars & snacks and
drinks. In addition, THG Nutrition offers performance
clothing through its activewear brand MP. THG Nutrition’s
products are primarily distributed direct to consumer
through its own websites, such as Myprotein.com.
This allows for close engagement with the brand’s
customers, while also enabling the brands to offer
a wider assortment of products than is typically available
through traditional retail channels, where the product
range is confined by shelf space.
Key trends
The global nutrition market’s growth is supported by the
long-term trend of consumers becoming increasingly health
conscious, and looking to consume more nutritional products.
This is common across a wide range of product categories.
The rate of adoption of healthier products is impacted
by income levels, with higher income countries typically
consuming more nutritional products. As lower income
countries develop, we would therefore expect to see higher
consumption of nutritional products, in line with the trends
seen in higher income countries.
The adoption of online channels has also been increasing in
the nutrition market, in line with that seen in many other retail
categories. In addition, e-commerce penetration is expected
to grow significantly in a number of key markets as the online
channel in these markets matures.
Consumers are not only turning to online channels for their
purchasing, but also using the internet to inform and educate
themselves of the benefits of nutritional products. Brands that
invest in producing engaging and educational content for their
consumers therefore stand to benefit through offering value to
consumers beyond the purchasing of products.
Our position
The competitive landscape within sports nutrition, our
primary market, is fragmented globally, comprising a very
small number of international brands of scale including
Myprotein, alongside a number of smaller brands that
operate principally in their local markets.
Myprotein is the largest online sports nutrition brand
globally,
1
and the most internationally diverse. THG Nutrition
is therefore uniquely positioned to capitalise on this long-
term channel shift towards e-commerce.
In addition, we see THG Nutrition’s online direct to
consumer model as a strategic benefit as consumers
increasingly turn to the internet to educate themselves
on the benefits of nutritional products. THG Nutrition’s
connection with consumers through its websites and apps
enables direct engagement with consumers that traditional
retail brands cannot achieve, positioning THG Nutrition as
a valuable source of engaging and educational content for
consumers.
THG Nutrition is positively differentiated from competitors
through its digitally-native direct to consumer model, its global
reach, the extent of its vertically integrated model, and its
broader focus, spanning the sports nutrition, vegan products,
vitamins, bars and snacks and sportswear categories.
Outlook
The total addressable market is expected to continue
to grow, reaching approximately £25 billion by 2025,
representing a 11% CAGR (2021 and 2025). The online
segment of the sports nutrition market has historically
grown faster than the overall market; the drivers of this
structural growth include the increasing long-term trend
towards healthier lifestyles, an increased awareness of
nutrition, and greater online engagement of consumers,
both in terms of purchasing and educating themselves
on the category.
1. According to management estimates.
Core Operating Model
THG operates a vertically integrated model to deliver products and services to customers, giving greater control
over revenue growth and costs to deliver profits and cash in the medium-term.
THG Beauty and THG Nutrition sell products direct to consumers across
the world. Revenue is generated on the sale of products and recognised
when received by the customer.
THG Ingenuity generates revenue selling services to business customers
through a combination of one-off fees for services such as initial website
build, recurring fees for regular services such as marketing, fulfilment
or software licences, and revenue share on Ingenuity websites.
Revenue
Input costs relate primarily to raw materials for goods manufactured in-house
(e.g. whey used in the manufacture of whey protein within the Nutrition division)
and finished goods purchased for resale (e.g. third-party beauty products
retailed by the Beauty division).
Distribution costs relate to the fulfilment and shipping of orders to customers.
THG has delivered efficiencies during the year through an innovative
warehouse automation solution, despite the inflationary cost environment.
Administrative costs relate primarily to marketing and people costs.
Costs
THG’s core divisions of Beauty, Nutrition and Ingenuity are profitable when
considering Adjusted EBITDA from continuing operations.
The Group’s medium-term Adjusted EBITDA target is 9%+ which is supported
by identified cost savings and in line with historical periods.
Adjusted
EBITDA
The Group is targeting to be broadly free cash flow neutral in 2023 and free
cash flow positive from 2024 onwards, with the strategy to reinvest for growth.
Cash
17 18
Annual Report 2022
Market description
The total addressable market for D2C across the three
core categories we operate within (Beauty, FMCG and
Retail) is $277 billion
1
.
Across our three solution areas of Technology Solutions,
Digital Solutions and Operations, we expect double digital
growth of 10% for fulfilment, 13% for Technology Solutions
and 16% for Digital Solutions by 2025
1
.
Products
Technology Solutions comprises our core commerce
platform and the infrastructure required to run and maintain
the platform; hosting, security, data and analytics.
Digital Solutions comprises managed services that are
designed to build and grow brands in new markets, on a
global-local scale: trading & marketing services, creative
strategy, content production, translation & localisation,
and access to Society; our global Creator network.
Operations includes our fulfilment capabilities and courier
management, sustainability and our customer contact solution.
Key trends
Retail organisations are facing significant headwinds.
“Retailers and digital direct-to-consumer businesses
are strapped for staff, forced to move faster than ever,
and heavily reliant on technology. That reliance, coupled
with lightning-fast changes to consumer expectations,
drives them to seek constant technological innovation.”
(The Forrester Wave™: B2C Commerce Solutions, Q2 2022)
Commerce is moving beyond traditional channels to a
world of everywhere, any mindset commerce. Online and
offline are merging, social and advertising content are
fusing, and community commerce is thriving through social
networks and online marketplaces as well as physical
stores and retail hubs.
With 45% of online consumers prioritising convenience,
brands will make direct shopping experiences a priority,
building a commerce presence in every possible moment.
However, as 57% of B2C e-commerce sales flowed through
marketplaces in 2020, we expect brands to fight back and
regain their customers away from marketplaces, investing
in their own commerce stack to make every touchpoint
a shoppable moment.
2
Our position
Ingenuity has high relevance and proven capabilities
to address these market shifts, delivering speed, scale
and channel expansion whilst minimising execution
risk for brands. We support our customers across
three main scenarios:
1. Replatforming and transformation of a customer’s
existing B2C digital commerce solution where the
customer is looking to accelerate digital brand
experience through improved platform functionality,
increased scalability of the platform solution whilst
reducing existing technical complexity and overall
technology costs.
2. Rapidly standing up a B2C digital commerce solution
to test brand and product propositions. Using our
out-of-the-box platform capability, we can quickly
execute a complete B2C digital commerce solution for
clients to have a site fully live and operational, at speed.
3. D2C internationalisation / new market entry supported
by our global digital commerce capabilities and
infrastructure (translation, product and content
localisation, local payments and local courier integration)
means launching into new markets with minimal cost,
risk and complexity.
Outlook
E-commerce sales are expected to reach $6.03 trillion
in 2023 with a CAGR of 11% by 2027, amounting to
$9.04 trillion.
The global market for digital commerce platforms is
estimated at $12.8 billion in 2022 and projected to reach
$38 billion by 2023, growing at a CAGR of 15% from
2022-2030.
3
1. Sources: Accenture Grow Digital Commerce, Euromonitor passport, Marketsandmarkets.com, e-commerce platform market, 2022,
Globalnewswire, e-commerce fulfilment services, September 2022, Global web hosting market share, 2022, Globalnewswire, Global Content
Marketing Industry, 2021, represents global content market industry.
2. Sources: THG Ingenuity; The Top Consumer Trends Impacting DTC Today, October 2022, Forrester; Digital Commerce Predictions, 2022.
3. Source: statista, digital commerce worldwide, 2022, Digital Commerce Platform: Global Strategic Business report, 2023.
1. Source: Euromonitor.
Market description
The global total addressable market for beauty and
Personal care was £414 billion in 2022, which grew +8%
year-on-year. THG Beauty is focused on the premium
segment of the market, which was valued at £120 billion
in 2022 and grew +9% year-on-year.
Products
THG Beauty’s portfolio encompasses multiple categories
across the beauty and personal care market through its
online beauty retail destinations, vertically-integrated
prestige brands and subscription-based beauty boxes.
Supported by a network of global and local influencers, and
over 30 localised websites powered by THG Ingenuity, our
pure-play online retail destination sites provide a critical
route to market for over 1,300 brands across haircare, skin
and bodycare, cosmetics and fragrance.
THG Beauty Brands seek to capitalise on the trend of digital
channel shift across skincare, haircare and cosmetics using the
THG Ingenuity platform to scale, and THG Labs for full control
over new product development (NPD) and supply chain.
Key trends
The online global beauty and personal care market’s
growth is supported by increased accessibility to the
e-commerce space and improvements in the delivery
of the in-store customer experience online.
Premiumisation is a continuing trend within the global
beauty and personal care space with prestige beauty
growing c.5% per annum, faster than mass market
at c.3% per annum. This growth is being driven by long-
term, increasing demand for higher quality products,
as well as increasing wealth globally.
Online penetration in the beauty and personal care
market was 18% as of 2021
1
, having increased from 8% in
2016. Whilst the pandemic boosted global e-commerce,
it has continued its upward trajectory, supported by
improvements in technology and global infrastructure.
Our position
Our diverse proposition across retail destination sites, THG-
owned beauty brands, subscription services and manufacturing
capabilities provides a complementary network of product and
service offerings, creating a competitive advantage through
strong brand partner relationships and an enhanced customer
experience. Operating globally provides wide exposure, not
only for THG Beauty, but also for brands who are able to
access multiple markets through one partner, supporting our
leading positions in the UK, US and Europe.
A broad range of 1,300 beauty brands across our sites allows
us to capture the opportunities that lie with the emergence of
fast growing, independent beauty brands and the long-term,
sustainable growth of established global players.
Consumers are increasingly looking for brands that align with
their personal values and allow them to express themselves,
often perceiving emerging brands as exciting and relevant.
THG Beauty is well positioned to support the growth of these
brands through unlimited shelf space, NPD capabilities and
unique insights into both consumer and customer trends.
These emerging brands, alongside the larger, more traditional
players, create an important layer of diversity in our portfolio that
enables us to adapt to customer needs and a dynamic trend
environment, whilst continually supporting the fundamental
demands of the wider beauty and personal care consumer.
Acting as a gateway into THG Beauty for our customers, our
beauty boxes represent global sampling opportunities for
a range of brands, with category leadership in UK and EU
markets. The use of monthly surveys enables us to gather vital
behavioural insights for THG and its brand partners to enhance
the customer purchase journey and support customer retention
across our sites.
Traditional brand discovery, such as department stores and
magazines, is becoming outdated and is currently in decline
with consumers increasingly turning to online platforms,
such as advice forums, online reviews and social media, for
information gathering and product discovery. Our leading
positions in online beauty retail and subscription services
allow THG Beauty to capitalise on this evolution.
Outlook
The global total addressable beauty and personal care market
is estimated to grow to c. £530 billion by 2026, at a CAGR of
6% between 2022–2026, with online adoption continuing to
grow, having risen to 18% in 2021 from 8% in 2016. Premium
beauty and personal care is expected to grow to £162 billion
by 2026, representing a CAGR of +8% between 2022-2026.
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Annual Report 2022
THG Beauty operates leading pure-play online retailers
such as Lookfantastic, Cult Beauty and Dermstore,
providing a diverse offering of over 1,300 premium brands,
alongside a portfolio of prestige, THG-owned beauty
brands and subscription box services, with leading market
positions in core territories such as the UK, US and Europe.
THG Beauty’s proposition is complemented by in-house
THG’s online multi-brand sites each have a unique
market position driving growth and category leadership,
not only through the delivery of prestige brands across
skincare, haircare, cosmetics and fragrance categories,
but also by retailing THG-owned brands and subscription
services alongside their direct-to-consumer sites and
third-party channels.
The integration between beauty retail destination sites,
THG-owned beauty brands and subscription services,
powered by THG Ingenuity, has allowed for a better focus
on customers’ needs through enhanced segmentation,
improved targeting and more engaging content delivery.
product development and manufacturing in the UK and
USA through THG Labs, which develops and manufactures
products for THG-owned brands, in addition to third-party
beauty brands. It is the distinct positioning of each of our
retail sites that enable us to engage with specific segments
and address their associated needs.
Owned prestige
brands
Production and
innovation
Subscription
boxes
Online multi
brand retail
Ecosystem
Our ecosystem...
Accelerates value creation from data, and generates
superior consumer engagement
Makes us a trusted brand partner providing deeper
relationships and enhanced offering
Supports a highly engaged, digitally native
workforce equipped with best-in-class digital tools
Creates a source of global advantage for our retail
banners and drives consumer engagement
Is the enabler to value-accretive and advantaged
beauty brand acquisitions
Operational Review
Key performance indicators, which include the impact
of the prior year acquisitions, have continued to improve
throughout the year, illustrating the resilience of the division,
given the challenges presented by the macroenvironment
in 2022. We maintained an active customer base of 9.2
million, demonstrating the effectiveness of our customer
1. Average Order Value is defined as the average order value per customer order on a gross revenue basis, inclusive of any shipping revenue.
2. Active customers is defined as customers who have purchased at least once within the period.
3. Number of orders is defined as orders fulfilled within the period.
Revenue Average order value
1
Number of orders
3
FY22
FY21
FY20
FY19
£1,235.0m £63
9.2m 1 7. 5 m
£1,181.5m £60
9.2m 1 7.1m
£751.6m £55
6.9m 13.1m
£478.3m £51
4.1m 8.3m
FY22
FY21
FY20
FY19
FY22
FY21
FY20
FY19
FY22
FY21
FY20
FY19
Active customers
2
engagement and retention strategy following enhanced
new customer acquisition throughout the COVID-19
pandemic. We continued to expand our beauty share
of wallet, reflected in higher average order values and
increased order numbers.
World’s #1 online pure-
play retailer for prestige
beauty products with
wide range
Broad appeal to typical
prestige beauty consumer
(age, income, engagement)
“ “ “
” ” ”
Younger, highly engaged
prestige beauty consumer;
on-trend matters
Older, more affluent
consumers who are highly
engaged in skincare
First-to-market choice for
indie brands; advice lead
for the beauty enthusiast
US leading online
retail for professional
skincare brands
Active engagement and educational content have
enabled THG Beauty to reach a wider international
audience and drive a strong sense of brand loyalty.
THG Beauty’s fully integrated digital model continued
to be a key driver in the establishment and strengthening
of brand relationships throughout 2022, enhancing the
positioning of core categories such as skincare and
haircare with continuous new brand launches on THG’s
retail sites, ensuring that THG Beauty continues to
address the evolving needs of its customers and stays
at the forefront of the beauty market.
21 22
Annual Report 2022
Strategic Highlights
Engagement and Retention
Existing customers drive over 75% of revenue within THG
Beauty and engagement and retention strategies are vital
in enriching their customer experience and deepening the
relationships that drive repeat purchase behaviour and
enable category leadership.
LF Premier, introduced in February 2022, allows customers
to pay a one-off fee for a 12-month recurring subscription
plan offering unlimited free delivery on most delivery
options – creating a new subscription model for the site,
with LF Premier customers representing over 12% of orders
in December 2022. Both spend per account and average
order frequency have increased over 130% when compared
to non-premier customers in 2022.
A further example of Lookfantastic’s investment in
engagement and retention is the October 2022 launch
of loyalty programme ‘LF Beauty Plus+’. Customers are
rewarded with points for engagement on site, such as
purchases and reviews, exclusive access to promotional
events and enhancements to personalised marketing
communications through an improved customer profile.
Since the launch, over 900,000 members have driven
positive changes across transactional key performance
indicators such as spend per account, order frequency
and units ordered.
In addition to the KPI improvement, our loyalty
programme has driven customer engagement and is
continually refining our level of customer insight and
understanding, aiding in the continual improvement
of value creation for our brand partners.
Territory Expansion
As well as continuing growth in our core territories, we have
seen growth in new markets following investment in the Group’s
global distribution network. This has allowed us to identify
growing market opportunities through the localisation of our
proposition in the MENA (Middle East and North Africa) region.
Using our ability to fulfil within the region and utilising our
experience from market entry into parts of Europe, we have
accelerated our brand awareness in the fast-growing region
for premium beauty, resulting in double digit growth across
MENA in 2022.
The UK, our largest market, also delivered a robust
performance in 2022, against an uncertain economic
backdrop and the normalising of customer spending
behaviour following the pandemic.
Fragrance Category Expansion
In 2022, fragrance continued to demonstrate its resurgence.
The fragrance market is estimated to have grown 9% year-
on-year, outperforming the global beauty and personal care
market which grew 8% between 2021 – 2022.
Growth in online penetration of the fragrance market has
echoed that of the beauty and personal care market, rising
from 7% in 2016 to 17% in 2021.
Expansion into this growing category allows us to fulfil more of
our customers’ needs, as well as deepening our relationships
with brand partners. Despite its sensory nature, customers are
increasingly making fragrance purchases online, and we will
continue to support the category’s evolution through initiatives
such as the Lookfantastic scent edit, which was launched
using our subscription boxes to access our highly engaged
beauty customers and introduce innovative ways of shopping
the fragrance category online.
THG Brands
Positioned at the top end of the 5-star market,
with a portfolio of over 500 spas across 55 countries,
ESPA have continued to lead the wellness space by
creating deeply sensorial and personalised wellness
experiences with leading partners, as well as in the
sanctuary of the home through its expertly crafted
products and treatments.
In 2022, ESPA’s Design and Consultancy service
delivered their bespoke wellness concepts to two
of the world’s most luxurious spas and resorts.
Overseeing everything from concept to build
development and interior design, two state-of-the-
art spas were brought to life in the form of ESPA Life
Waldorf Astoria in Lusail, Doha and the Ritz-Carlton
New York, NoMad.
The pioneering concept in Qatar is the new flagship
for the Middle East and represents the future of
wellness, whilst at the same time reflecting the
unique character of Doha, having taken inspiration
from the luxury world of yachting in its elegant spa
with a 180-degree view of the bay and Lusail skyline.
THG Beauty’s subscription boxes have been an
important component in supporting THG x Planet
Earth in 2022. Lookfantastic Beauty Box introduced
an initiative to reduce excess packaging in the
thousands of beauty boxes sent out monthly
to our subscribers. To protect the climate and
nature, delivery has been reduced to contain one
reformatted outer corrugate box, and booklets
featuring information and articles on the month’s
edition have been digitalised. This change in
packaging will result in a 70% decrease in carbon
footprint when compared to previous packaging,
and the 100% recyclable boxes has resulted in a
61% reduction in material end-of-life waste. This has
enabled us to improve customer experience as well
as source the reduced packaging more locally.
THG SUBSCRIPTION BOXES
Winner of Allure Beauty Expert Best of Beauty 2022
Best Brightening Eye Cream, this breakthrough
product designed and manufactured by THG
Labs illustrates the effectiveness of our in-house
development and manufacturing capabilities.
Ophthalmology-tested, its unique concept dramatically
reduces under-eye discolouration and addresses
concerns such as dullness, uneven texture and dark
circles, with 89% of women reporting firmer-looking
skin and 87% seeing brighter, more radiant skin
and an improvement in the appearance of fine
lines and wrinkles.
1
PERRICONE VITAMIN C ESTER CCC + FERULIC BRIGHTENING
UNDER-EYE CREAM
1. Source: The Benchmarking Company, 2022.
Offering holistic wellbeing in the heart of New York,
the spa at the Ritz-Carlton New York, NoMad creates
meaningful wellness journeys centred around the
mind, body and skin, with treatments incorporating
mindfulness modalities and techniques that allow
guests to unwind from life in the city.
23 24
Annual Report 2022
THG Nutrition comprises a collection of sports nutrition and
wellness brands, that includes the Myprotein brand family.
Our leading nutrition and wellness brands empower our
consumers to live healthier lives and deliver on their personal
nutritional goals. Our brands are delivered to our consumers
through a network of localised direct to consumer websites,
enabling consumers from all over the world to experience the
nutritional benefits of our products. We continue to invest in
localising our brands, technology and operations to bring our
products to an increasingly global customer base.
Our brands are also aspirational brands, with the growth of
our activewear range, which now accounts for 8% of total
brand sales. This is further evidenced by the increasingly
premium focus of our Myvitamins brand, which now targets
the “beauty-from-within” category within the beauty market,
through a range of products, such as retinol, collagen and
hyaluronic acid.
Our commitment to product quality is demonstrated
through the investments we have made in best-in-class
product innovation and production facilities in the UK, US
and Poland, ensuring our products remain at the forefront
of innovation, and our manufactured to the highest quality
standards. This is complemented by investment in more
sustainable product and packaging forms as part of
THG x Planet Earth.
E-commerce is the winning channel within sports nutrition,
accounting for 35% of global sports nutrition sales in
2021. In addition, e-commerce penetration is expected
to grow significantly in a number of key markets as the
online channel in these markets matures. Myprotein is the
largest online sports nutrition brand globally,
1
and the most
internationally diverse. THG Nutrition is therefore uniquely
positioned to capitalise on this long-term channel shift
towards e-commerce.
Myprotein is positively differentiated from competitors
through its digitally-native direct to consumer model, its
global reach (75% of the brand’s 2022 sales were outside the
UK), the extent of its vertically integrated model (supported
by 7 manufacturing facilities), and its broader focus, spanning
the sports nutrition, vegan products, vitamins, bars and
snacks and sportswear categories.
The brand is currently the category leader (online and
offline) in the UK and Western Europe, with 2022 market
shares of approximately 18% and approximately 14%
respectively, according to Euromonitor data. In addition,
based on the rapid sales growth THG Nutrition has delivered
in Asia historically, we believe there is a significant growth
opportunity in Asia, where the sports nutrition category is
currently underpenetrated and there is rapidly increasing
adopting of digital channels. Our market share in the US also
remains low relative to other territories, with this representing
a significant expansion opportunity in future years.
Myprotein has increased its market share of the sports
nutrition category over recent years,
2
with significant
headroom for further growth, particularly given the structural
market tailwinds supporting our growth, such as consumers
becoming increasingly health conscious and increasing online
penetration within the category. We therefore remain highly
confident in our ability to continue to grow market share in
existing markets and further expand into new markets.
1. According to management estimates.
2. Source: Euromonitor
Future Outlook
Alongside building upon leading positions in core territories,
THG Beauty will utilise its global customer base to focus on
driving profitable and sustainable growth in territories where
we have medium-market positions and localised infrastructure.
We will continue to leverage brand relationships to be the
first-to-market with products, supported by THG Labs driving
product innovation and newness for our brands. As we maintain
category leadership in haircare and skincare, there will also be
a focus on the development of our fragrance and cosmetics
categories through leading brand and product assortment,
engaging content and best-in-class customer experiences.
Fantastic Futures
Launched in July 2022, Fantastic Futures is an initiative
dedicated to supporting niche start-ups by boosting online
exposure to their business. After pitching to Fantastic Futures’
experts, the successful brand then gains access to the global
retail platform alongside THG’s suite of brand solutions,
including THG Ingenuity’s direct to consumer technology,
content and marketing, and digital strategy capabilities in
order to grow, support and strengthen their brand, and THG
Beauty’s product manufacturing capabilities.
Aligning with THG x Planet Earth, the debut brand on
the Fantastic Futures platform was Fiils, a beauty brand
at the forefront of the refillable beauty space since 2020,
championing sustainable beauty products and encouraging
more conscious consumerism. Fiils aims to overhaul
bathrooms of single use plastic and minimise waste while
offering a luxe range of refillable, everyday essentials that are
made with the best ethical, natural and organic ingredients.
Since its on-site launch in July 2022, orders including Fiils
products have reached over 500, demonstrating the impact
of Lookfantastic as an incubator for smaller brands by driving
engagement, as well as continuing to strengthen its own
position by bringing relevant new brands to consumers.
We will continue to invest in engagement and retention
strategies by focusing on our understanding of the customer
and developing deeper insight to evolve our targeting and
personalisation strategy across our retail destination sites.
Our diverse proposition, including our end-to-end platform,
global footprint and multi-branded retail offerings will allow us
to leverage our competitive advantage to become the digital
partner of choice for the world’s biggest beauty brands and the
leading digital destination for beauty consumers.
In response to shoppers’ demands for more transparency
when shopping for beauty online, Cult Beauty began
using Provenance to embed sustainability badges on-site,
introduce impact-focused search filters and curate best-
selling edits such as the Cult Conscious beauty box.
Protecting long-term value relies on clearly communicating
social and environmental impact information to shoppers,
and in doing so, Cult Beauty aims to grow the market for
truly sustainable brands and help establish benchmarks for
new brands joining the retailer.
Provenance is a software solution that provides accessible
and trusted information about a product’s origin and its
impact on people and the planet, empowering shoppers
PROVENANCE X CULT BEAUTY
to drive progress through their purchasing power as
well as encouraging brands to surface the proof of their
sustainability impact claims.
By connecting participating brands with conscious
shoppers and improving their product page conversion,
Cult Beauty is not only empowering customers to
shop in line with their personal values, but powerfully
rewarding brands for their transparency and
sustainability commitments.
Cult Beauty X Provenance has proven successful in
driving key performance indicators such as increased
order numbers and higher purchase rates across more
than 110 brands using the software.
25 26
Annual Report 2022
Revenue Average order value
1
Active customers
2
Number of orders
3
2022
2021
2020
2019
£675.1m £50
7m 13.2m
£659.5m £46
7. 2 m 13.9m
£562.3m £47
6.3m 12.3m
£412.9m £48
4.3m 8.7m
FY22
FY21
FY20
FY19
FY22
FY21
FY20
FY19
FY22
FY21
FY20
FY19
1. Average Order Value is defined as the average order value per customer order on a gross revenue basis, inclusive of any shipping revenue.
2. Active customers is defined as customers who have purchased at least once within the period.
3. Number of orders is defined as orders fulfilled within the period.
Operational Performance
In 2022, THG Nutrition revenue grew 2.4% YoY to £675m,
with this growth principally driven by the performance of
Myprotein, the largest online sports nutrition brand globally,
alongside continued growth in manufacturing revenues.
Our broad customer base is evidenced by our community
of over 8 million social media followers, with our multi brand
approach enabling us to capture a much greater share of
each consumer’s health and wellness spend, while also
encouraging cross category purchases. Regular consumer
engagement and educational content have enabled the
Group to reach an increasingly wider international audience.
THG Nutrition finished the year with 7 million Active
Customers globally, reflecting the strong brand loyalty of
existing customers and the successful acquisition of new
customers across a number of strategic markets.
Strategic highlights
Territory expansion
THG Nutrition’s growth in 2022 was driven by growth
across the Myprotein brand family, alongside growth of our
manufacturing revenues. In the UK market, we remain the
#1 brand in the market
1
, and continue to grow sales through
bringing the brand to a broader range of customers, new
product development, and partnerships, such as the recently
announced Iceland partnership.
Myprotein takes a fully localised approach to brand
development, operating over 60 localised websites
supported by localised content, product catalogues, trading,
marketing, influencers, payment options, fulfilment and
customer service. This approach has proven to be highly
effective and has facilitated rapid international growth, with
Myprotein holding leading market shares in the UK and
Western Europe, while rapidly scaling its presence in Asia
and North America, which represent significant opportunities
for further market share expansion.
We continue to invest in localising our proposition, with
a notable example being the investment made in local
operations in Australia in 2021, which helped drive
a rapid acceleration of our sales in Australia in 2022.
These investments included a new warehouse in
Melbourne, powered by THG’s proprietary WMS,
Voyager. The move has led to delivery times reducing
from 10 days to 3 days, and postage costs decreasing
by -75%. Since the move, Myprotein has acquired and
retained more customers (+47% new customers vs 2020),
and observed an uplift in orders (+81% orders vs 2020)
and site conversion (+45% increase in site conversion
vs 2020). The localised operations are also complemented
by the use of local influencers and affiliates to help build
brand equity in the region, establishing a footprint for future
brand partnerships and localised new product development.
Category expansion
Since we acquired Myprotein in 2011, we have taken it from
a small UK-focused brand with a limited number of product
lines, to become a leading online global nutrition and lifestyle
brand with over £600 million revenue.
In 2023, we will deliver the next major evolution of our
brand family, with the launch of a new holistic wellbeing
brand addressing the vegan, natural and organic nutrition
categories. The brand will build on the success of Myvegan,
which is our current flagship brand in this category, while
expanding its reach to the adjacent categories of organic and
natural nutrition. As with our other Nutrition brands, the new
brand will sit within the Myprotein brand family, leveraging
the brand equity and awareness of the master Myprotein
brand, while creating cross-selling opportunities across the
various brands when customers shop through the Myprotein
website. This approach enables us to catch a much greater
share of a customer's total nutrition purchases than if we
were to just sell a narrow product range, while also enabling
us to bring a wider range of customers into our ecosystem.
New product development
Our vertically integrated business model enables us to be at
the forefront of innovation and new product development,
informed by millions of data insights from our global markets.
We research, develop and manufacture ourselves, and
Myprotein is renowned for being first to market with new
products and formats, such as with our Clear Whey protein
variants and with Multivitamin gummies. The capabilities
we now have in-house continue to support incremental sales
growth opportunities across a broad range of categories,
enabling more consumption occasions, while enabling us
to accelerate speed to market and launch new products
more quickly in response to changing market conditions.
A notable highlight in 2022 has been the development
of new ranges of innovative bars through Brighter Foods
(acquired in 2021), a leading product developer and
manufacturer of sports nutrition bars and healthy snacking
products. This included the development of our new Impact
Bar, our improved Layered Bars, and our first-to-market
Breakfast Layered bars.
The launch of Whey Forward in the US market is an
example of our ability to launch first-to-market products
within the sports nutrition category. This animal-free
performance protein caters for a broader range of dietary
requirements, whilst not compromising on taste and
performance. With Perfect Day, the creator of the world’s
first animal-free dairy protein, we have developed a formula
which is identical in composition to the whey protein found
in cow’s milk. Whilst core whey products remain a growth
category, sustainable alternatives with lower exposure to
commodity prices are a key development area, and we
are excited to follow our US launch with a recent launch
into the Asia market.
Functions managed in-house by
Internal and
external market
research
Formulation,
feasibility and
commercial review
Production
trial
Concept
ideation
Internal and
external customer
panelling
Influencer
and social
trends
Product
launch
1. Source: Euromonitor.
27 28
Annual Report 2022
PARTNERSHIPS
We have built Myprotein into a category-leading
brand in the 10 years since its acquisition.
The unrivalled brand equity we have developed
is now being brought to new product formats
and retail channels through a range of partnerships.
These new partnership help move THG Nutrition
towards its strategic ambition of becoming
a lifestyle brand group that addresses a broad
range of consumers.
A notable expansion is our partnership with Hotel
Chocolat, where we have co-developed a range
of premium protein bars. These bars have proven
highly successful with our customers since they
were launched in November 2021, and are now
a top 5 best-selling bar range within THG Nutrition.
We have also recently launched strategic global &
localised partnerships with Mike & Ike in the United
States, Vimto in the United Kingdom, and Jelly Belly
globally, which bring these household brands into
the nutrition space for the first time. In 2023, we will
launch a further partnership with Perfetti Van Melle
under its Chupa Chups brand, a global leading
confectionary brand.
These new partnerships offer our brands opportunities
to extend into new categories, sales channels, increase
brand touchpoints and engage consumers in new
ways, while extending their purchasing of the brands
to new purchasing occasions.
Retail
THG Nutrition brands are pursuing selective expansion into
retail channels, principally in the UK, Japan and USA.
In the UK, Myprotein holds prominent listings in Asda,
Tesco, Iceland and Co-Op. Our protein bars, snacks and
drinks are also now stocked in PureGym, the largest gym
chain in the UK, with expansion across further gym groups
a strategic priority for 2023. In Japan, Myprotein products
MYPROTEIN X ICELAND
In 2022, Myprotein signed a five-year partnership
deal with Iceland Foods to launch a range of frozen
ready meals. The ready meals launched in 1000+
Iceland stores and online in January 2023. The new
range is jointly developed by Myprotein and Iceland
and will provide healthier and more nutritionally
complete versions of many popular meals, and
will include fully prepared meals, pizzas, wraps,
ingredients, desserts and ice creams.
Iceland, the second largest frozen food retailer
by market penetration, was selected as a partner
given its reputation for the highest product quality,
with 96% UK coverage, and its award-winning
track record as a licensing partner. Myprotein’s
licensing strategy further builds non-digital channel
brand awareness and product range expansion,
complementing its UK and global store-based
distribution network through retailers such as the
Co-operative Group in UK and Don Quijote in Japan.
The partnership underlines the strength of the
Myprotein brand, the largest online nutrition brand
globally, and the potential to further expand the
brand across strategic partnerships in future periods.
Customer
The THG Nutrition customer base is highly engaged, with
over 80% of revenue coming from repeat customers.
In addition, in recent years an increasing share of revenue
has been driven through channels that incur no or very low
marketing costs. A key driver of this has been the launch of
our mobile apps in 2021; mobile apps have contributed an
increasing share of revenue and now account for 15%
of THG Nutrition online revenue.
Influencers remain at the heart of our customer engagement
strategy, and the regular and highly engaging content they
produce is a significant asset to our THG Nutrition brands. The
content they produce is regularly fed into our own marketing
channels, providing authenticity that complements our own
marketing content. Given consumers are increasingly turning
to online channels to educate and inspire themselves around
nutrition and fitness, influencers play an increasingly important
role in engaging with and educating our customer base.
An example of our successful investment in content is our in-
house The Supplement magazine, which is provided for free to
our online customers. Since its launch in 2021, The Supplement
has proven highly popular with our customers, and is now one
of the highest circulation magazines in the UK, with our most
recent issue reaching a digital circulation of over 500,000.
To further expand the reach and engagement of The
Supplement, we are developing a new range of “recipe”
magazines in 2023.
Our broad customer base is evidenced by our community
of over 8 million social media followers, with our multi brand
approach enabling us to capture a much greater share of each
consumer’s health and wellness spend and encouraging cross
category purchases. We continue to develop highly engaging
and educational content to ensure high levels of customer
satisfaction and brand awareness. The results of this can be
seen through market research that shows Myprotein ranks
either #1 or #2 in aided brand awareness in 8 key markets, with
significant increases in aided awareness seen in the territories
such as the UAE and Australia.
We continue to explore new ways of reaching our customers,
with our expansion onto Tiktok, where we now have more
than 0.5m followers and host regular shopping events, being
a notable example, and which demonstrates the relevance of
our brand to new consumers. While we look to leverage new
retail and marketing channels to grow our brand awareness
and market share, our direct channels, such as our website,
app and magazine, create a hub for our community that allows
direct engagement with our customers, which is key to building
long-term brand equity and customer loyalty. We continue to
invest in strengthening our direct channels and see this as a
key source of competitive advantage for our brands.
Future outlook
We will continue to evolve the Myprotein brand through
building out and launching new sub-brands where
opportunities exist for further category expansion.
Within our existing categories, we are focused on delivering
innovative and highly targeted new product development
through our in-house capabilities with a focus on more
sustainable ingredients and materials. By continually evolving
our portfolio of products and brands to better suit consumers
needs, we capitalise on new opportunities and expand our
addressable markets.
Our nutrition brands are accessible to a wide range of
customers, not just the regular gym goer. We intend to further
broaden the appeal of Myprotein through a rebrand in the
second half of 2023 that will further strengthen our identity
as a brand that resonates with a wider audience and
subsequent consumption occasions.
In addition, continued expansion into traditional retail channels
through our convenience ranges will enable us to reach
new customers, and drive incremental consumption, while
continuing to raise brand awareness. Licensing partnerships
leverage the power of the Group’s brand portfolio and digital
first business model. It offers our brands opportunities to
extend into new categories, increase brand touchpoints and
engage consumers in new ways.
We are able to leverage our D2C capabilities to elevate
partnerships to new levels, further driving visibility and
brand equity.
are sold across the Don Quijoite, Costco, and Family Mart
retail chains, with further distribution opportunities being
explored across a range of international territories. In the
USA, Myprotein recently launched on The Vitamin Shoppe,
one of the leading specialty nutrition retailers in the USA, as
we continue to scale the reach of the Myprotein brand in the
USA market, which is a key strategic focus going forward.
29 30
Annual Report 2022
2022 saw an evolution in Ingenuity’s growth strategy as we
progressively pivoted away from small business customers
to deliver transformative e-commerce solutions for larger
organisations across our three focus categories of beauty,
FMCG and retail.
This transition has been made possible through the
development of Ingenuity’s headless solution (the decoupling
or ‘detaching’ of the user experience (front-end) layer of the
website from the back-end functionality of the platform) and
modular platform capabilities. This offers greater choice and
flexibility to larger-sized customers looking to upgrade all, or
some, of their existing e-commerce technology stack, as well as
offering customers the ability to design more bespoke, branded
user experiences by managing the front-end of the website
themselves. As we increasingly support these larger customers
in the e-commerce technology decision-making process, THG
Ingenuity has found itself naturally playing a more significant
role right at the heart of these customers’ transformation
agendas, frequently broadening the project scope across all
elements of digital business change.
With this shift towards larger, more strategic customers comes
another evolution in the form of our commercial model as we
place greater focus on generating recurring revenues through
platform license fees and full-service contracts where the
customer adopts our suite of service offerings across our three
core solutions: technology, operations and digital.
Coca-Cola Europacific Partners
Since launching on the Ingenuity platform in November
2020, Coca-Cola Europacific Partners (CCEP) has
continued to experience strong performance across
key metrics. Conversion rate increased 1.15 percentage
points, average order value increased 17.4% and revenue
increased by 92.2% year on year. This, in large part, has
been achieved through the continuous collaborative
testing and optimisation of trading strategies by the client
and THG Ingenuity’s e-commerce team.
Expanding the customer base
In 2022, we confirmed new customer partnerships with
brands across our core categories of beauty, FMCG and
retail including Philip Morris International, Kraft Heinz and
Anastasia Beverly Hills. We see customers commissioning
an increasing number of services across our unified product
offering including D2C website design and build, international
site rollout, translation, creative and content production,
performance marketing and strategy.
As the number of brands live on the platform increased
through 2022, we saw the positive impact of recurring
revenue and uptick in GMV from these live sites.
Matalan
Through 2022, THG Ingenuity delivered a large-scale digital
transformation project for Matalan – replatforming Matalan’s
existing e-commerce store and building true omnichannel
capabilities for one of the UK’s leading value retailers. The
project, launched in March 2023, will enable Matalan to
fulfil online orders from its stores as well as ‘endless aisle’
functionality (the ability to display store stock availability,
online.) Through our solution, Matalan is also utilising THG
Ingenuity’s Order Management System, which is replacing
its legacy system, and integrating our customer service
software, THG Orbit, into its customer service centres.
As well as enhancing the customer experience on site
and in stores, THG Ingenuity’s app platform will ensure
Matalan maximises engagement opportunities from its
always-on customer approach. In addition, the integration
of the Matalan Me Loyalty Programme into the Ingenuity
platform will allow Matalan’s popular loyalty programme to
be truly omnichannel – a first for Matalan. THG Ingenuity
will integrate with Mirakl, to offer Dropship & Marketplace
capability, significantly increasing the product range
available for Matalan customers.
And finally, to ensure the delivery of a truly world-class
digital experience, Matalan is leveraging THG Studios to
develop and deliver all on-site fashion product photography
from July 2023.
CLIENT CASE STUDY
CLIENT CASE STUDY
3231
Annual Report 2022
Platform evolution
Through 2022, we continued to invest extensively in our
platform, with one of our most significant evolutions being
the release of our headless solution.
Coggles, THG’s own-brand luxury online fashion store
offering aspirational third-party brands access to an
international customer base, was the first site to be
relaunched on Ingenuity using a new headless solution.
The front-end flexibility offered by the headless solution
enabled greater customisation and tooling options for rich
feature creation without the need for development changes.
The relaunch resulted in higher traffic, average session
duration and conversion and, in turn, greater revenue
for the brand.
This shift in our platform strategy offers our customers
new and greater flexibility, while extending the reach of
our addressable market to a larger network of enterprise
customers, alliances, and partner agencies – those looking
for a more flexible solution to build a custom, front-end
whilst benefiting from THG Ingenuity’s extensive back-end
capabilities and applications. Mondelēz International was
THG Ingenuity’s first customer to launch a D2C website
utilising this headless solution, working with a third-party
agency to design the front-end brand experience for
Mondelēz International’s Toblerone website and integrating
this into THG Ingenuity’s commerce capabilities.
In addition, the modularisation of the THG Ingenuity platform
has enabled a new type of customer to consume THG’s
breadth of microservices, all of which can be integrated
into a customer’s existing or future technology-stack,
independently. This opens up further opportunities for THG
Ingenuity to be selected as the e-commerce provider by
larger-sized customers who are looking to upgrade certain
elements of their existing e-commerce ecosystem without
the need of a full replatform, saving the customer cost, time
and reducing complexity.
Web Commerce
• Mobile, Web & App
• Special Offer Engine
• AI Recommendations
• Wishlist
• Product Reviews
• Shoppable Blog
• Returns
• Referrals
• Subscriptions
• Headless
• Powerful CMS
• Order Management System
• Product Information Management
• Marketplace
• Email Marketing
• Segmentation
• Campaign
Management
• Customer Loyalty
Programmes
• Audience Management
Across Channels &
Media
• Optimised Workflows
To Retain & Grow
Customer Base
• Optimised Basket
• Conversion
• 50+ Payment Options
• Global Payment
Offering
• Local Alternatives
• Tax & Duty
Calculation
• ISO Certified
• AI Powered
• Human Interactions
For High-Risk Orders
• 400+ Rules
• Class Leading Detection
• Carrier Management
• End To End Tracking
• Next Day Delivery
• Over 200 Courier
Services
• Range Curation
• Attribute
Management
• Inventory Publish
• Order Processing
• Amazon Connector
• Warehouse
Management System
• D2C Fulfilment &
Returns Handling
• Multiple
Pack Types
• MHE
• Click & Collect
• Pick From Store
• Ship From Store
• Instore Ordering
• Returns To Store
• Omnichannel
Transaction Support
• Share Stock Online
• Multi-Channel Incl.
Live Chat, Whatsapp
& Social
• Machine Learning
Powered Response
Tools
• Returns
• Telephone Ordering
• Real-Time Data
• AI & ML Capabilities
• One Business
Data View
• SKU-Level Analytics
• Customer Feedback
• Global Infrastructure
• Secure Global Coverage
• High Performance
• Managed Hosting
• Automation
& Control
• Active-Active Sites
• Global Operation Centre
Mobile Commerce Customer & Loyalty
Payments, Tax
& Duties
F
raud
Couriers &
Tracking
Marketplace Order
Fulfilment
WH Fulfilment
Store Order &
Fulfilment
Customer Services
Data, Analytics
& M/L
Cloud
Web Shopper Facing - Front End
ELYSIUM THG/APP THG/PERSONIFY THG/CHECKOUT THG/DETECT THG/DELIVERED THG/MMSTHG/VOYAGER THG/OMNI THG/ORBIT THG/IQ
THG/CLOUD
SERVICES
Behind The Scenes - Back End
Resilient
Architecture
Attractive & Easy
Navigation
Inspiring
Engagement
Frictionless
Checkout
Secured Order
Processing
Fast & Reliable
Delivery
Helpful Customer
Assistance
Data-driven
Insights
Secure &
Performant
3433
Annual Report 2022
Product evolution
As part of our product evolution, we’ve simplified the go-to-
market proposition of our complete e-commerce platform
and service capabilities into three core solutions: Technology
which encompasses the core commerce platform, data,
hosting and security; Digital, which encompasses the
Within this, we continue to further evolve the offering of
individual propositions, with particular spotlight on:
Data Analytics (THG IQ): The IQ data proposition has
traditionally supported our THG customer base across
a number of facets including consumer insights, analytics
and reporting. More recently, the team has expanded to
support customers across a number of additional areas
in line with the increasing necessity for data driven and
programmatic digital strategies. To this effect, we have
developed a more comprehensive audience insight,
segmentation and technology function as well as broader
consultative and data services to support customers
generating a better understanding of consumers and
consumer behaviour. This has included more recent
partnerships with platforms such as Liveramp and
Qubit and further opportunities across the Customer
Data and Machine Learning space being considered.
Strategy: Our experienced strategy team has
developed go-to-market propositions for some
of THG Ingenuity’s largest customers, consulting
on ‘where to play and how to win’ strategies in the
e-commerce ecosystem and creating a point of
differentiation to deliver profitability in the space. In
2022, we evolved our strategy offering with our ‘D2C
playbook’ proposition which brings together insight-
driven and experience-based recommendations
to provide customers with a step-by-step guide for
successful e-commerce execution.
Fulfilment: We continue to build a best-in-class complete
e-commerce fulfilment solution powered by THG’s
proprietary technology, with AutoStore automation at its core.
Bringing together Voyager, THG’s Warehouse Management
System (WMS) and Warehouse Control System (WCS),
THG Delivered’s courier integrations and THG Orbit’s
omnichannel customer support solution with AutoStore’s
proprietary automation hardware and software, THG FIR/
ST’s frictionless fulfilment environment is disrupting the
market and bringing a highly efficient end-to-end fulfilment
solution to customers of all sizes.
Partnership evolution
Throughout 2022, we continued to integrate select, strategic
partners such as Liveramp, Bynder and ContentSquare onto
the platform, increasing platform extensibility for Ingenuity
customers looking for best-in-class solutions to data
enablement, asset management, testing and optimisation
and social integration. These partners, whilst providing
additional revenue streams, offer choice for Ingenuity
customers looking to utilise our complete e-commerce
platform whilst retaining elements of flexibility.
The evolution of the Ingenuity platform into a headless
and modularised solution has opened new opportunities
for partnerships with technology consultancies, systems
integrators and development agencies looking to work with
a proven, API-first, cloud-based e-commerce platform for
their own customers’ solutions. THG Ingenuity’s alliance
programme identifies like-minded partners to go to market
with, selling together to enter new markets and acquire new
customers. In December 2022, THG Ingenuity announced
its first partnership with UK-based technology consultancy;
AND Digital.
peripheral brand-building capabilities of creative and
campaign, marketing and data, strategy, translation and
influencers, and finally; Operations, neatly bringing together
the three core offerings needed to build a digital business:
e-commerce technology, brand experience and fulfilment.
Business focused on domestic UK market
FROM... TO...
Truly global leader with increasing
revenues coming from outside UK
Strong player in beauty, retail & FMCG
Multichannel digital commerce provider generating
revenues from non D2C channels & services
Targeting medium, large and enterprise clients
Extensive partnership ecosystem
High-value added digital services
Beauty specialist & emerging retail and FMCG player
D2C exclusivist
Limited selectiveness of customer size
Internal capacity building
Resource-intensive managed services model
Future outlook
Over the next three years, THG Ingenuity will transform into a multi-category and multi-channel D2C provider with
a global footprint:
CASE STUDY
Brand evolution
In 2022, we renewed our investment in marketing
with a heightened focus on building awareness for
the THG Ingenuity brand in our focus markets of
the UK and Europe, the USA, Australia, India and
the Middle East. Content has been a key driver of
this approach, and in October we launched our first
consumer trends whitepaper: “The Future Consumer
Trends Impacting D2C Business.” This coincided with
our inaugural Future of Commerce Event.
Day one’s agenda at The Future of Commerce Event
commenced with the launch of our whitepaper.
Following this, headline speakers Meta, Microsoft
and TikTok shared their thoughts on how commerce
businesses can meet the heightened needs of
today’s consumers. In addition, THG Ingenuity’s
own customers, Homebase and Nestlé, shared their
thoughts on what D2C means for the future of their
organisation. Day two’s agenda focused on the key
capabilities required to accelerate change through
digital commerce. In a fireside chat, our keynote
speaker, Diary of a CEO’s Steven Bartlett, shared his
advice on leadership capabilities. Ending two fantastic
days of talks, the event culminated with a panel
discussion bringing together THG’s own perspectives
on the future of commerce.
With over 100 attendees, the event enabled guests to
come together, network and share their challenges
and ambitions for their own future of commerce.
35 36
Annual Report 2022
Chief Financial
Officer review
Year ended 31 December 2022 Year ended 31 December 2021
Before
Adjusted Items
Adjusted
Items
Tot al Before
Adjusted Items
Adjusted
Items
Tot al
£’000 £’000 £’000 £’000 £’000 £’000
Consolidated income statement
Revenue 2,239,229 - 2,239,229 2,179,910 - 2,179,910
Cost of sales (1,333,737) (25,517) (1,359,254) (1,225,506) - (1,225,506)
Gross profit 905,492 (25,517) 879,975 954,404 - 954,404
Distribution costs (380,652) (2 2 ,117) (402,769) (386,928) (43,012) (429,940)
Administrative costs (674,626) (29 8,1 45) (972,771) (575,711) (86,216) (661,927)
Operating loss (149,786) (345,779) (495,565) (8,235) (129,228) (137, 4 6 3)
Revenue
Group revenues grew by 2.7% to £2,239m (2021: £2,180m).
THG Beauty sales grew +4.5% to £1,235m (2021: £1,182m),
THG Nutrition grew +2.4% to £675m (2021: £660m) and
THG Ingenuity delivered +9.1% growth in external revenue
to £160m (2021: £146m). The contribution from acquisitions
– predominantly in the Beauty division - was in line with
expectations at c.£125m. Organic performance was pleasing
relative to peers and against tough comparatives as the world
re-opened, with stable customer metrics.
International sales accounted for 57% (2021: 58%) of total
Group revenue. The US continues to be a strong growth area
for the Group delivering c10% revenue growth in the year with
sales of £447m (2021: £406m) representing 20% of the Group,
following on from the successful integrations of US acquisitions
in recent years including Dermstore, Bentley Laboratories and
Perricone MD. THG Nutrition continues to perform well in the
US albeit from a moderate base, with the UK delivering sales
growth in excess of the Group, reinforcing our strong position
and continued ability to increase sales demonstrably in our
more mature markets.
Revenue growth was driven by a higher pricing environment,
particularly in THG Nutrition, but was offset by challenges in
respect of the reopening of physical retail, pressures on the
consumer environment driven by the emerging cost of living crisis,
along with disruption to the UK courier network in the final quarter
of the year, the latter being more acute in THG Beauty.
Note that during 2022, revenue generated from the
discontinued categories totalled £119m (2021: £147m).
More information on these categories is included later in the
report. Excluding these areas, the revenues from the continuing
operations delivered growth of +4.3% year on year.
Alternative performance measures
The following table provides adjusted measures. The Group believes that these alternative performance measures, which
are not considered to be a substitute for IFRS measures, provide stakeholders with additional helpful information on the
performance of the business. These alternative performance measures are consistent with how the business performance
is monitored and reported through internal management reporting to the Board.
The below table summarises the result from operations before depreciation, amortisation, share-based payments and SaaS
change in accounting policy costs. These amounts are also reconciled back to the nearest IFRS measure within this table:
Gross profit
Adjusted gross profit was £925m (2021: £975m) equating to
a gross profit margin of 41.3%, 340bps adverse year on year.
Gross profit on a statutory basis decreased to £880m from
£954m with a margin of 39.3% (2021: 43.8%). One key
driver of the reduction on a statutory basis is the £26m
inventory provision and costs of decommissioning facilities
recognised in 2022, both of which are adjusting items given
their one-off nature. At the year end, certain loss-making
categories and territories primarily within THG OnDemand
were placed under strategic review. This review is now
complete and these operations will be fully exited by the
end of Q3 2023. This has led to this provision relating to the
expected discounting and disposal of inventory following
the exit of unprofitable websites and warehouses.
The cost environment in 2022 has been unusual, with
elevated whey commodity prices and other raw materials
experiencing high inflation, notably labour and energy,
across most major cost lines which has applied pressure
to margins. Measured price increases were implemented
to mitigate a proportion of the impact of this temporarily
elevated input cost, however the Group also invested in
consumer price protection, particularly in Nutrition,
which has reduced margins during the year.
These margin headwinds began to abate across the
second half of the year, a trend which we have seen
continue into early 2023.
Damian Sanders
Executive Director and Chief Financial Officer
Note: The table on the previous page shows financial results for gross profit, distribution costs and administrative costs before the impact of depreciation,
amortisation and share-based payments. The impact is as follows:
• For statutory presentation gross profit includes charges of £20.0m (2021: £20.4m) for amortisation and depreciation.
• For statutory presentation distribution costs include charges of £27.2m (2021: £17.8m) for amortisation and depreciation.
• For statutory presentation administrative costs include charges of £155.9m (2021: £131.3m) for amortisation and depreciation
and £10.7m (2021: £nil) for share-based payments.
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Adjusted gross profit 925,488 974,767
Adjusted distribution costs (353,412) (369,120)
Adjusted administrative costs (5 0 7, 9 62) (444,371)
Adjusted EBITDA 64,114 161,276
SaaS change in accounting policy 10,183 -
Adjusted EBITDA pre SaaS change in accounting policy 74,297 161,276
EBITDA losses from discontinued categories 14,582 8,348
Adjusted EBITDA (continuing) 88,879 169,624
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Adjusted EBITDA 64,114 161,276
Depreciation (94,191) (70,478)
Amortisation (108,975) (99,033)
Share-based payments (10,734) -
Operating loss before adjusted items (149,786) (8,235)
Adjusted items – impairment (275,422) (55,990)
Adjusted items – other (70,357) (73,238)
Operating loss (495,565) (137, 4 6 3)
Reconciliation from Adjusted EBITDA to Operating loss
"We have taken decisive action over the last year, to reduce the
Group cost base, provide strategic optionality and a stronger
platform for growth in the context of a tough trading comparative
period and a challenging macroeconomic backdrop."
37 38
Annual Report 2022
Operating expenses
Distribution costs on a statutory basis reduced as a
percentage of sales by 170bps compared to 2021, culminating
in a cost of £403m (2021: £430m), which is 18.0% (2021: 19.7%)
of revenue. Included within statutory distribution costs are
£22m of costs relating to incremental delivery fees in respect
of Covid-19 and commissioning of new facilities. In 2021, these
costs totalled £43m. The substantial decrease is due to lower
incremental Covid-19 costs this year following the impacts of
the pandemic lessening on the supply chain and a reduction
in costs for new site commissioning as the Group network
expansion programme draws to a conclusion, generating
substantial capacity for growth. Adjusted distribution costs of
£353m (2021: £369m) were 15.8% (2021: 16.9%) of revenue.
This improvement was driven by the Group’s continued
focus on network optimisation, and the expanded usage of
warehouse automation utilised to combat high levels of labour
inflation in the market.
Administrative costs on a statutory basis totalled £973m
(2021: £662m) with the increase driven by three key factors.
The first being a non-cash impairment charge in respect of
THG Beauty of £183m (2021: £nil) and THG Ingenuity of £87m
(2021: £nil). A result of the divisional reorganisation is that
additional cash-generating-units were identified during 2022
which has led to the impairment reviews being completed at
a significantly more granular level than in prior periods. This
combined with more challenging global markets where the
market price of many technology businesses has fallen over
£'000 2022 2021
Adjusted EBITDA 64,114 161,276
Margin 2.9% 7.4 %
SaaS change in accounting policy 10,1 83 -
Adjusted EBITDA pre SaaS change in accounting policy 74,297 161,276
EBITDA loss from discontinued categories 14,582 8,348
Adjusted EBITDA (continuing) 88,879 169,623
Margin 4.2% 8.3%
the last 18 months, macroeconomic, inflationary and interest
rate pressures along with the substantial amount of assets
included within THG Beauty from recent acquisitions, and
THG Ingenuity following the continued investment in the
global infrastructure and platform has led to the impairment
of historical goodwill balances. Secondly, a £10m charge (2021:
£nil) for software-as-a-service has been recognised within
administrative costs in 2022 compared to being capitalised
within intangible assets in 2021, following the change in
accounting policy during the prior year. Finally, in 2022
a share-based payment charge of £11m was also incurred
following the new employee incentive schemes launched
in the year which were £nil in the prior year.
Adjusted administrative costs as a percentage of revenue,
increased by 230bps year on year, driven by well-documented
global inflationary increases, primarily in respect of marketing
costs driven by significant paid media and cost per click
inflation. This impact was partially offset by the Group’s
technology-focused marketing approach and influencer
model, alongside the execution of an extensive cost-reduction
program across the second half of the year. The Group’s cost-
reduction programme delivered a reduction in headcount
of almost 2,000 heads through technology investment, and
simplification of operations within its core divisions across
THG Beauty, THG Nutrition and THG Ingenuity. The full impact
of this will continue to flow through into 2023 as it annualises.
SaaS change in accounting policy
Following the IFRIC agenda decision in 2021, the Group
updated its accounting treatment and policy for IAS 38
Intangible Assets accordingly. The impact of this was that
costs in relation to SaaS solutions have been recognised
within administrative costs during the year. Comparative
costs were recognised within intangible assets and
amortised in line with the previous accounting policy.
An alternative performance measure (APM) has been
presented this year to provide a like-for-like comparison
reflective of the prospective treatment. This APM will
not be repeated in future years.
Discontinued categories
During the year, and as previously announced, a strategic
review was undertaken in the year to review our non-core
operations. As a result, the Group proactively chose to
discontinue certain loss-making territories and categories.
A new APM has been presented this year to provide
information as a result of this decision. The categories that
have been discontinued – notably THG OnDemand and
ProBikeKit - contributed revenue of £119m (2021: £147m)
and an EBITDA loss of £15m (2021: £8m). The strategic
review is now complete with these operations expected
to be fully exited by the end of Q3 2023.
Depreciation and amortisation
Total depreciation and amortisation costs were £94m and
£109m respectively (2021: £70m and £99m), an increase of
19.9% on the prior year. Depreciation increased as a result
of the previous investment made in the global warehouse
expansion program which is almost complete, with the
automated beauty fulfilment facility at Manchester Airport
(Icon 2) finalising its commissioning phase in early 2023.
Amortisation increased primarily due to the full year impact
of the charge in respect of intangibles recognised on
acquisitions during 2021, plus the continued investment
in our proprietary technology platform during the period
which totalled £60.7m (2021: £47.6m). This investment
is focused on the technology to support both internal
and external customers and ensures that we continually
enhance the functionality and capability of the platform.
Operating loss
Operating loss before adjusted items totals £150m
(2021: £8m). This loss was a result of the challenging
macroeconomic environment (principally cost inflation
and commodity prices) and our focus on price protection
to customers. These costs are expected to be partially
transitionary in nature and are showing promising signs
of abating as we move into 2023. Furthermore, the Group
has responded with a number of pricing and cost initiatives
during the year to ensure the cost base is appropriately
rebalanced and these will continue to annualise into 2023.
The Group incurred an operating loss in the period of
£496m (2021: £137m). This is primarily driven by the
increase in costs as set out above which have compressed
gross margins, along with one-off costs incurred during the
year. These costs relate mainly to the non-cash impairment
charge and costs related to the discontinuation of loss-
making categories.
Non-cash impairment totals £275m. This was driven
by the factors set out in the adjusted items section
later in this report and in more detail within note 11.
The impairment relates to charges in respect of THG
Beauty and THG Ingenuity totalling £269m, other
intangibles within discontinued categories of £4m
and assets held for sale totalling £2m.
Costs incurred in respect of the discontinuation of loss-
making categories are a result of inventory provisions in
respect of discounting and clearance along with disposal
of impacted inventory, costs of warehouse exits and other
non-recoverable assets. These costs total £32m.
Finance costs net of finance income
Finance costs net of finance income have increased to
£54m (2021: £49m) driven principally by higher lease
charges as the new facilities from the warehouse expansion
programme contain a full year charge in 2022, vs. part year
in 2021 and the additional £156m debt facility drawn in Q4.
Loss before tax and tax rate
Reported loss before tax was £550m (2021: £186m).
The effective tax rate is 1.8% (2021: 25.9%), based on
a total tax credit of £9.8m (2021: £48.2m). The effective
tax rate differs from the average statutory rate of 19.0%.
This is primarily due to a movement in deferred tax
not recognised (-7.8%), and the impact of goodwill
impairment (-9.3%).
At the balance sheet date the total net deferred tax liability
is £77m (2021: £74m). The deferred tax liability in respect
of intangible assets recognised on consolidation was
£151m (2021: £152m). The deferred tax asset in respect
of tax losses recognised was £55m (2021: £60m). There
were £58m of unrecognised deferred tax assets in respect
of tax losses at the balance sheet date (2021: £nil). This
non-recognition has an impact on the income statement
tax credit, and this is one of the primary reasons for the
effective tax rate being below the statutory rate.
Earnings per share
Loss per share was (£0.44) per share (2021: (£0.13) per
share). The non-cash impairment charge has a material
impact here and if this were to be removed, the loss per
share would have been (£0.21) per share.
Adjusted EBITDA and Adjusted EBITDA (continuing)
Adjusted EBITDA fell to £64m with a margin of 2.9% (2021: £161m, margin of 7.4%) with adjusted EBITDA from continuing
operations totalling £89m compared to £170m in 2021.
Adjusted EBITDA (continuing) represents a margin of 4.2% (2021: 8.3%) reflective of the challenging environment that we
have seen in 2022 and the Group’s strategy to, as far as possible, protect consumers from these inflationary pressures in
addition to adverse foreign exchange, together with administrative cost inflation across payroll and marketing.
39 40
Annual Report 2022
£m 2022 2021 Change %
Revenue 1,235.0 1,181.5 +4.5%
Adjusted EBITDA 32.9 70.2 -53.2%
Margin % 2.7% 5.9% -330bps
£m 2022 2021 Change %
External revenue 159.6 146.3 +9.1%
Internal revenue 597.4 602.5
1
-0.9%
Total revenue 757.0 748.9 +1.1%
Adjusted EBITDA pre SaaS change in accounting policy 29.3 40.4 -2 7. 5%
Margin % 3.9% 5.4% -150bps
Adjusted EBITDA 19.1 40.4 -52.7%
Margin % 2.5% 5.4% -290bps
THG Beauty sales grew +4.5% year on year to £1,235m despite tough covid comparatives in 2021, due to online retail
benefitting in H1 2021, from the closure of physical retail stores. The division successfully integrated Dermstore, Cult Beauty
and Bentley Laboratories into THG Beauty in the year, which supported growth across our two key territories, the UK and
the US, with the acquisitions delivering in line with expectations.
THG Beauty delivered Adjusted EBITDA of £33m (2021: £70m) with a margin of 2.7% (2021: 5.9%), being a 330bps reduction
on 2021. The reduction in margin is an effect of inflation, the consumer environment deteriorating driven by the emerging
THG Nutrition sales grew 2.4% year on year to £675m, with foreign exchange providing headwinds, alongside a particularly
strong comparative period from the increase in online retail due to the closure of physical retail stores. Within THG Nutrition,
the input cost environment was one of the most challenging we have ever faced. In the context of this exceptionally
challenging environment, we are encouraged by the robustness of trading to deliver revenue growth in 2022.
THG Nutrition delivered an Adjusted EBITDA of £52m (2021: £77m) with a margin of 7.7% (2021: 11.6%), being a 390bps
reduction year on year and considerably below medium-term norms for this division reflecting exceptional input prices.
Measured price increases were successfully implemented during 2022, which has partially mitigated increases in whey input
prices, freight costs and foreign exchange rate movements, although we continued to support customers through these record
high-cost pressures which temporarily suppressed the margin. When commodity prices normalise, which we are already
experiencing in 2023, we expect a return to the historical EBITDA margin within THG Nutrition over the medium-term.
THG Ingenuity revenue from external customers increased by 9.1% to £160m, with a strategic re-positioning in Q3 2022, focusing
on higher value and higher margin clients which provide improved quality recurring revenue. Total Adjusted EBITDA was £19m
after a £10m charge for the SaaS accounting policy change as explained earlier.
THG Ingenuity delivered an Adjusted EBITDA margin of 2.5% (2021: 5.4%), being a 290bps reduction year on year. Following the
decision to reposition the division, there was a strategic exit of smaller accounts to implement the new strategy which will continue
throughout 2023. As revenue scales and the revenue mix evolves towards the commerce offering we consider margins will return
to and exceed those achieved historically.
Ingenuity Commerce revenue of £47m (2021: £45m) includes Software-as-a-Service licence fees, monthly brand building fees,
infrastructure service fees, revenue share, translation and creative services, with most of this being recurring in nature, albeit
complemented by non-recurring fees. FY22 revenue growth was suppressed while management execute the change in strategy,
with smaller contracts paused, and the new customer base on a longer lead time from tender to live site.
Following the announcement of the divisional reorganisation during 2022, THG Ingenuity began to charge for its services to
internal customers across the wider THG PLC Group. This generated revenue of £597m, relating to services provided which have
previously not been recharged across the group due to the historical corporate structure in place. The revenue relates to platform
fees, customer services, fraud detection services, THG Studios, fulfilment, postage and marketing services. This revenue
is eliminated on consolidation.
1. At the year end, certain loss-making categories and territories within non-core divisions were placed under strategic review and subsequently management
has decided to exit these areas. The exit doesn’t meet the criteria under IFRS 5: Discontinued operations as these categories and territories are not a major
component of the Group as defined by the accounting standard, however, to provide further information on the ongoing revenue and Adjusted EBITDA of
the Group the result of these operations has been shown separately in the above table.
1. Internal revenue was not recharged until the completion of the divisional reorganisation, however for illustrative purposes this has been shown above for
2021. This has been calculated using the same charging mechanisms in 2022 to provide a like-for-like comparison.
2022
£m
THG
Beauty
THG
Nutrition
THG
Ingenuity Other Central
Inter-group
elimination
Continuing
Total
1
Discontinued
categories
FY 2022
Tot al
External revenue 1,235.0 675.1 159.6 50.9 - - 2,120.6 118.7 2,239.2
Inter-segment
revenue
- - 597.4 - - (597.4) - -
Total revenue 1,235.0 675.1 757.0 50.9 - (59 7.4) 2 ,120.6 118.7 2,239.2
Adjusted EBITDA
pre SaaS costs
32.9 51.8 29.3 (1.9) (23.2) - 88.9 (14.6) 74.3
Adjusted EBITDA 32.9 51.8 19.1 (1.9) (23.2) - 78.7 (14.6) 6 4.1
Adjusted EBITDA
margin
2.7% 7. 7 % 2.5% -3.7% - - 3.7% -12.3% 2.9%
2021
£m
THG
Beauty
THG
Nutrition
THG
Ingenuity Other Central
Inter-group
elimination
Continuing
Total
2
Discontinued
categories
FY 2021
Tot al
External revenue 1,181.5 659.5 146.3 46.1 - - 2,033.4 146.5 2 ,179.9
Inter-segment
revenue
3
- - 602.5 - - (602.5) - - -
Total revenue 1,181.5 659.5 748.8 46.1 - (602.5) 2,033.4 146.5 2,179.9
Adjusted EBITDA 70.2 76.6 40.4 (2.1) (15.5) - 169.6 (8.3) 161.3
Adjusted EBITDA
margin
5.9% 11.6% 5.4% -4.6% - - 8.3% -5.7% 7.4 %
Overview
Segmental Summary
Following the completion of the divisional reorganisation during the year, the Group reports 31 December 2022 results on a
divisional basis. This is a change in the current year and the prior year has also been restated to show a comparative on a
like-for-like basis of preparation.
Following the restructure, revenue is now recharged for the services that THG Ingenuity provides to the wider Group in the
form of platform fees, customer services, fraud detection services, THG Studios, fulfilment, postage and marketing services.
These items are eliminated on consolidation and shown separately in the following tables.
2. For the loss-making categories and territories within non-core divisions that have been shown separately within the 2022 table under the discontinued
categories heading, the same adjustment has been included for the 2021 result to show a comparative of continuing operations year on year.
3. Internal revenue was not recharged until the completion of the divisional reorganisation, however for illustrative purposes this has been shown above for
2021. This has been calculated using the same charging mechanisms in 2022 to provide a like-for-like comparison.
£m 2022 2021 Change %
Revenue 675.1 659.5 +2.4%
Adjusted EBITDA 51.8 76.6 -32.4%
Margin 7.7% 11.6% -390bps
cost of living crisis and in Q4 material disruption in the UK courier network impacting seasonal gifting and consumers
propensity to spend online.
Three key acquisitions being Cult Beauty, Dermstore and Bentley, were integrated in the year, with synergies beginning to be
realised in the second half of 2022. Average order values continue to increase totalling £63 per basket for 2022 (2021: £60),
this is driven from a focus on customer loyalty (with the launch of LF Beauty+) and continued investment to drive increased
customer engagement in both third-party and THG own-brands and growth of market share in our key territories.
41 42
Annual Report 2022
Inter-group elimination
Intergroup eliminations relate to revenue recharged for the services that THG Ingenuity provides to the wider Group in the
form of platform fees, customer services, fraud detection services, THG Studios, fulfilment, postage and marketing services.
These are eliminated on consolidation.
In order to understand the underlying performance of the
Group, certain costs included within cost of sales, distribution,
administrative and finance costs have been classified as
adjusted items. These items principally relate to acquisition-
related restructuring and integration costs, transportation,
delivery and fulfilment cost increases in relation to Covid-19.
All material classes of adjusted items reduced year-on-year.
Following the divisional reorganisation of the Group in the year,
the Group has undertaken a strategic review of loss-making
categories and territories. At the year end, certain loss-making
categories and territories primarily within THG OnDemand
were placed under strategic review. This review is now complete
and these operations will be fully exited by the end of Q3
2023. This has led to a one-off non-cash inventory provision
of £26m recognised within cost of sales. This one-off provision
relates to discounting and clearance along with the disposal of
impacted inventory within these non-core divisions and disposal
of inventory following the decision to decommission some
unprofitable warehouse operations within Asia.
Other costs following the outcome of the strategic review
totalling £7m are included within administrative costs. These
costs include the impact of triggering early lease break clauses
2022 2021
£’000 £’000
Within Cost of sales
Inventory provision for discontinuation of loss-making categories
and decommissioning of facilities following strategic review
25,517 -
25,517 -
Within Distribution costs
Transportation, delivery and fulfilment costs in relation to Covid-19 18,504 26,628
Commissioning – new facilities 3,613 16,384
22 ,11 7 43,012
Within Administrative costs
Other costs following the outcome of strategic review 6,942 -
Restructuring costs to simplify the group structure 6,803 10,233
Acquisitions – legal and professional costs - 12,225
Acquisitions – restructuring and integration 8,046 5,328
Impairment of goodwill - 53,008
Impairment of certain intangible and tangible assets associated
with Software-as-a-service arrangements
- 2,982
Impairment of assets for discontinuation of loss-making categories
3,763 -
Impairment of assets – macroeconomic impact on valuation
269,828 -
Impairment of assets held for sale
1,831 -
Other legal and professional costs
569 1,350
Donations
362 1,090
298,145 86,216
Within Finance costs
Softbank option – non-cash
(601) 601
Total adjusted items before tax
345,178 129,829
Tax impact
(53,949) (11,901)
Total adjusted items
291,229 11 7,9 28
For full details on each category of adjusted item see note 4 to the financial statements.
Discontinued categories
Adjusted Items
£m 2022 2021
1
Change %
Revenue discontinued 118.7 146.5 -19.0%
Adjusted EBITDA from discontinued operations (14.6) (8.3) +74.7%
Margin % -12.3% -5.7% -660bps
At the year end, certain loss-making categories and territories primarily within THG OnDemand were placed under
strategic review and the Group has subsequently decided to exit these areas enabling management to focus attention
on a simplified and streamlined group. The exit doesn’t meet the criteria under IFRS 5: Discontinued operations,
as these categories and territories are not a major component of the Group as defined by the accounting standard.
However, to provide further information on the ongoing revenue and Adjusted EBITDA of the Group, these have been
shown separately. The discontinued categories contributed £118.7m of revenue and an Adjusted EBITDA loss of £14.6m
in 2022. Management are reviewing the optimal route for exit of these categories with the process expected to be
complete by the end of Q3 2023.
1. For the loss-making categories and territories within non-core divisions shown separately within the 2022 table under the discontinued categories heading,
the same adjustment has been included for the 2021 result to show a comparative of continued operations year on year.
for the unprofitable warehouse operations within Asia and
marketing costs for pre-releases that will no longer be launched.
The full exit of the discontinued areas is expected to be
complete by the end of Q3 2023 with costs not recurring
after this date.
Additional restructuring charges of £7m were incurred, these
being the costs of executing the divisional reorganisation,
principally relating to professional fees.
Following the decision to discontinue certain categories
and territories, an impairment has been charged totalling
£4m against affected assets.
A further impact of the divisional reorganisation is that the
assets and cash flows of each division are now separately
identifiable. The result being the identification of additional
cash-generating-units (‘CGUs’), which are reflective of the
new corporate structure. The result of more CGUs is that
the impairment review has been undertaken at a more
granular level than in previous years. Following the significant
acquisitions within the THG Beauty division in recent years,
a substantial amount of intangible assets are included within
the underlying asset base whilst the market price of comparable
Other
Central costs
£m 2022 2021 Change %
Revenue 50.9 46.1 +10.5%
Adjusted EBITDA (1.9) (2.1) +11.3%
Margin % -3.7% -4.6% +90bps
£m 2022 2021 Change %
EBITDA loss from central PLC costs (23.2) (15.5) +49.3%
Other includes THG Luxury and THG Experience. Revenue growth of 10.5% has been achieved as a result of the reopening of
THG Experience venues in 2022, following lockdowns in 2021 driven by the worldwide pandemic, alongside the strong growth
achieved within THG Luxury.
Adjusted EBITDA loss of £2m remained consistent with the prior year with margin pressure driven by macroeconomic pressures
seen in other trading divisions.
Central costs relate primarily to the PLC Board remuneration, professional services fees, group finance, M&A, risk
(insurance) and governance costs that are not recharged to the divisions as they principally relate to the operations of
the PLC holding company. The increase in FY22 was driven by an increased cost base as a result of the macroeconomic
environment, increased investment in governance, and investment in sustainability initiatives.
43 44
Annual Report 2022
The total cash outflow for the year was £63m (2021: £237m).
There was an inflow from working capital movements
totalling £24m (2021: outflow £65m) primarily driven by
a focused reduction in inventory. This reduction followed
a prolonged period of investment over recent years, to
manage uncertainty around Brexit and subsequently
Covid-19, on top of an increased inventory footprint required
to expand our global warehouse supply chain which can
now be rationalised as the expansion program
is approaching completion.
Cash paid on adjusting items totalled £45m (2021: £66m)
driven by a reduction in transportation, delivery and
fulfilment costs in relation to Covid-19. This has decreased
as the effects of global lockdowns have lessened during
2022, alongside the successful integration of 2021
acquisitions, allowing synergies to begin to be realised
which will annualise into 2023.
In 2021, there was a cash outflow of £770m for acquisition
of subsidiaries. This has reduced to £6m in 2022, solely
related to the settlement of contingent consideration
due on the acquisitions completed in 2021.
Balance sheet
2022 2021
£'000 £'000
Loans and other borrowings (679,189) (489,865)
Lease liabilities (334,376) (349,173)
Cash and cash equivalents 473,783 536,827
Sub-total (539,782) (302,211)
Adjustments:
Retranslate debt balance at swap rate where
hedged by foreign exchange derivatives
24,782 (2,548)
Net debt (515,000) (304,759)
Net (debt)/cash before leases liabilities (180,624) 44,414
The Group’s balance sheet remains robust closing the
period with cash balances of £474m (2021: £537m). The
€600m Term Loan B matures in December 2026 and the
incremental £156m facility matures in Q4 2025. The Group's
revolving credit facility of £170m remains undrawn and has
not been drawn post IPO.
Net debt before lease liabilities and adjusted for the impact
of hedging was £181m (2021 net cash: £44m). The increase
in net debt year on year is driven by the investment in
property, plant and equipment, leases and intangible assets
in the period totalling £176m.
Cash and cash equivalents and net cash before lease liabilities.
Capital expenditure
Property, plant and equipment totalled £360m (2021:
£336m) which increased to £1,276m (2021: £1,506m) when
including intangible assets. The movement in the year
was driven by additional investment in the THG Ingenuity
platform and continued investment in the Group’s global
warehouse expansion programme which is now nearing
completion. These were offset by the depreciation,
amortisation and impairment charges incurred.
2022 2021
£’000 £’000
EBITDA 64,114 161,276
Working capital movements 23,528 (65,322)
Tax paid (4,857) ( 7,09 5)
Adjusted items (45,071) (65,528)
Net cash generated in operating activities 37,7 1 4 23,331
Acquisition of subsidiaries net of cash acquired (5,691) (769,890)
Purchase of property, plant and equipment (94,854) (111,553)
Purchase of intangible assets (81,564) ( 7 7,62 0)
Proceeds from issuance of ordinary shares net of fees (73) 760,230
Proceeds from bank borrowings
156,000 -
Other
(74,576) (61,252)
Net decrease in cash and cash equivalents
(63,044) (236,754)
Cash and cash equivalents at the beginning of the year
536,827 773,581
Cash and cash equivalents at the end of the year
473,783 536,827
Cashflow
Damian Sanders
Chief Financial Officer
17 April 2023
assets, alongside many technology businesses, has fallen over
the last 18 months. This is reflective of more challenging global
markets following the macroeconomic, inflationary and interest
rate pressures driven by, amongst other things, the Russia-
Ukraine conflict. Against this backdrop, the impairment review
has led to an impairment of £183m within the Beauty division.
In addition, an impairment charge of £87m has been recognised
within the THG Ingenuity cash-generating-unit. This has arisen
as the impairment review has been undertaken at a more
granular level than in previous years. Following the appointment
of our new CEO of THG Ingenuity in 2022, the Group has
repositioned its strategy. Management believe they have made
conservative growth assumptions which are lower than the
growth rate prospects of the sectors in which THG Ingenuity
operates given the recent change in strategy. Alongside this,
THG Ingenuity has made significant investment for the future
in its platform and global infrastructure network. These factors,
combined with the challenging macroeconomic environment
impacting several of the key assumptions, particularly the
discount rate, which have also had a bearing on peer valuations,
has led to the impairment of the historical goodwill within this
cash-generating-unit.
During the year, there has been a cost incurred in respect
of transportation, delivery and fulfilment costs in relation
to Covid-19. The ongoing incremental excess cost across
accounting periods is driven by the continued lockdowns
experienced in Asia which still affect air traffic and key shipping
lanes. As the effects of the pandemic lessen and the lockdowns
in Asia ease, the service providers will no longer need to charge
these incremental costs.
In addition, restructuring and dual-running integration costs of
£8m were also incurred in relation to the 2021 acquisitions as
they were embedding into the Group infrastructure. These costs
are expected to decrease in 2023.
In 2021, there was a one-off £760m cash inflow from share
issuance. This did not recur in 2022.
As part of investing and growing the infrastructure of the
Group and the distribution network, there has also been
investment in property, plant and equipment and intangible
assets (primarily the Ingenuity platform) totalling a cash
outflow of £176m (2021: £189m). This is lower than initially
guided as the group rationalised spend in year.
The expanded global distribution infrastructure and
automation is delivering operating efficiencies during
a substantial cost inflationary period, and further working
capital improvements are expected.
In October 2022, the Group signed an incremental £156m
banking facility, provided by existing lenders, for a three
year term, illustrating their continued support for the group.
This provided additional cash inflows in 2022.
The Group ended the year with cash and cash equivalents
of £474m (2021: £537m).
45 46
Annual Report 2022
Stakeholder Engagement
The Directors are collectively responsible under section 172 of
the Companies Act to act in the way they consider, in good
faith, would be most likely to promote the success of the
Company for the benefit of its shareholders as a whole and to
take into account wider stakeholder needs when doing so. In
its considerations and decision-making processes the Board
therefore has regard to certain key matters including, but not
limited to, the long-term impact of the Company’s operations
on local communities and the environment and the need
to preserve the Company’s reputation for high standards of
business conduct.
The Board understands the importance of active engagement
with its stakeholders across the entire value chain, including
its employees, external suppliers and partners, and through
Stakeholder How THG Engages How The Board Engages Find Out More
Customers and
Consumers
We enable brands to
have direct relationships
with customers
and consumers by
providing a high-quality
retail experience and
establishing a relationship
of trust
• Through its brands via social media platforms
• Consumer surveys with insights shared with
and analysed by Senior Management
• Global digital content including THG Media’s
branded magazine portfolio and mobile apps
• Award–winning customer contact centre
• Rebrand strategy for THG Nutrition devised
considering consumer and market insights,
with roll out planned for 2023
• Launch of loyalty scheme LF Beauty Plus+
Indirect:
• Board presentations on customer satisfaction
scores and process improvements via the
Chief Experience Officer
• Monthly updates on key cybersecurity
enhancements via the Chief Technology Officer
• Monthly review of operational priorities in place
to deliver a high-quality customer experience via
the Chief Operating Officer
• Monthly updates from Divisional chief executive
officers on strategic priorities, including innovation
and brand partnerships with a focus on
understanding the benefits for customers
and consumers
THG Beauty
See page 21
THG Nutrition
and Wellness
See page 26
Shareholders
We seek to create value
for Shareholders and
through our purpose,
vision, values and
strategy, deliver long-term,
sustainable growth
• Annual report & accounts and RNS
announcements
• Scheduled investor presentations
and conference calls
• Corporate website
• One-to-one and group investor meetings
• Site tours
Direct:
• Annual general meetings
• The Chair and SID are available to meet
Shareholders upon request
• The Chair has engaged with institutional
Shareholders regarding Board composition
and continues to do so
• The CEO and CFO have an ongoing
programme of meetings with institutional
Shareholders, supported by relevant members
of Senior Management
Indirect:
• The Board review and approves material
communication to investors, such as trading
updates results announcements, the annual
report and accounts, and significant
business events
Governance Report
See page 105
THG’s purpose and strategic priorities is focused on delivering
sustainable, long-term growth enabling the business to
generate positive and impactful change. THG is a global digital
innovator focused on transforming the retail experience for
consumers and brand owners and prides itself on building
strong business relationships to facilitate this.
Six internal and external stakeholder groups have been
identified as critical to THG’s future success. Details of these
stakeholder groups are provided below alongside why they
matter to THG and how THG and its Board has engaged
with them throughout the 2022 reporting period. The
values of leadership, innovation, decisiveness, ambition and
collaboration drive the engagement strategy across these
stakeholder groups.
Stakeholder How THG Engages How The Board Engages Find Out More
THG Ingenuity Clients
We support clients
on their digital
transformation journeys
• THG Orbit proprietary customer
service software
• Quarterly business reviews
• Customer satisfaction survey and net
promoter scores
• Face-to-face meetings and site visits
• Annual Future of Commerce event
• Quarterly webinar programme
• Monthly client newsletters
• eCRM campaigns
Direct:
• Attendance at annual Future of Commerce event
• Engagement with clients
Indirect:
• Review of new and incremental business pipeline
• Review of quarterly Ingenuity client satisfaction
and net promoter scores
• Monthly review of key technology
and platform developments
THG Ingenuity
See page 32
Our Suppliers and
Partners
We promote open and
transparent working
practices and collaborate
for mutual, sustainable,
and commercial success
• Implemented a programme requiring direct
suppliers to be signed up to Sedex from an
ethical sourcing perspective
• Risk assessment for all suppliers and a
process for reviewing and increasing audits
for higher-risk suppliers
• Strategic partners and suppliers identified
and engaged on carbon reduction matters
• Annual anti-bribery training undertaken by
the Procurement team
• Quarterly business reviews with Ingenuity
partners to assess sales pipeline, conversion
and joint marketing strategies
Indirect:
• Regular review of key raw material prices
and buying strategy
• Approval of development of in-house supplier
onboarding platform
• Regular review of THG Procure implementation
• Approval of the new Ethical Code of Conduct
• Regular review of partnerships and alliances,
to maximise strategic alignment and client reach
• The Board conducted a review of the Modern
Slavery Policy, Gifts & Hospitality Policy
and Anti-Bribery Policy
THG Nutrition
and Wellness
See page 26
Supply Chain
and Circularity
See page 66
THG Ingenuity
See page 32
Our People
We aim to ensure THG
provides a supportive
environment with
career development
opportunities at all levels,
with a particular focus
on building the skills of
tomorrow
• Launch of Leadership
& Management Academy
• Launch of the Black Community Network
• LGBTQ+ & Allies Society
• Partnership with Change 100
• THG Value Awards – inviting employees
to suggest a fifth company value
• Group-wide sustainability training
• H2 2022 launch of ‘Orbitor’ programme
which encourages a culture where quality
is as important as productivity
Direct:
• End-of-year colleague presentation delivered
by Executive Directors
• Annual Divisional business strategy updates
with Senior Management
Indirect:
• Approval of Group Diversity & Inclusion
strategy and policy
• Monthly review of attrition and key recruitment
matters via the Group Talent Director
• The Board supported the addition of the fifth
Company value
• Reviewed and approved the updated role profiles
for the CEO, Independent Chair and SID
Our People
See page 74
Diversity and
inclusion
See page 72
Society & Communities
We aim to build skills and
develop talent to promote
greater social mobility,
whilst protecting the
environments we operate
in and source from
• Engagement with key charities to support
those impacted by the war in Ukraine,
donating food and supplies
• Support for Ukraine-based employees
• Supporting local community projects,
including tackling homelessness, and
women and children’s charities
• Promoted THG’s Graduate Programme
to a wide variety of universities to attract
diverse talent
• Launch of Fantastic Futures
Indirect:
• Updates provided to Board on charity donations
to Ukraine
• Sustainability Committee approved Group Social
Impact Strategy
• Quarterly review of progress against the 2030
Sustainability Strategy
• Support for submission of net zero targets to SBTi
Sustainability
Strategy
See page 57
Investing in our
communities
See page 73
Our People
See page 74
Section 172 Statement
Stakeholder Engagement
47 48
Annual Report 2022
Stakeholder engagement:
Suppliers and partners
THG partners with suppliers to ensure it can continue to
address customers and consumers’ evolving demands. The
Board is committed to fostering and developing supplier
relationships in a way that empowers the brands we own
and those which we work with to drive innovative solutions
to consumer demands, while balancing the need to tackle
societal and environmental issues.
The Group’s Supplier Manual governs our relationships
with suppliers and ensures THG maintains high standards
of business conduct. THG’s purpose guides the ambitions
of the business to promote environmental and social
responsibility across the supply chain, positioning the
growth of the business in a sustainable way that enhances
long-term value creation for all stakeholders.
THG engages with each of its suppliers to establish suitable
payment terms with each individual supplier, recognising
that different businesses will have different cash-flow
pressures. All suppliers go through a relevant approval
process comprising:
• Finance (financial security and fraud risk review)
• Legal (contractual terms review)
• Ethical (supply chain risk and ethical approval process)
• Supplier quality assurance (technical and quality approval)
• Senior Management (including Procurement
director) approval
In 2022, and with Board support, the Group initiated the
development of a proprietary supplier onboarding platform
within which suppliers will be able to share details to
support an open and transparent means of communication
with THG. The aim is to establish an efficient supplier set-
up process which allows key information to be provided to
THG on an ongoing basis (e.g. new social audits at their
sites). This platform will minimise the risk of suppliers being
onboarded without the relevant internal approvals and
completed documents in place. It will also provide a means
to communicate, store and update all required documents,
audits and updates.
THG Procure, a peer-to-peer (P2P) system, was rolled
out across much of the business in 2022 to support
timely supplier delivery bookings and payments. This has
significantly improved first-time invoice match rates to
improve our P2P efficiency and support supplier payment
on time performance.
Key outcomes
• THG Procure covers 77% of suppliers and will be
rolled out across the remaining suppliers in 2023
• 78% of the Group’s own-brand suppliers
1
have
signed THG’s Ethical Code of Conduct
• 62% of the Group’s own-brand suppliers
1
are linked
to THG on SEDEX
• Full ethical audits are in place across 45%
of own-brand suppliers
• 94% of the Group’s own-brand suppliers
1
have been
made aware of our 2030 Sustainability Strategy
1. Group’s own-brand raw materials and finished goods suppliers.
Stakeholder engagement:
Customers and consumers
Our global customer base is served through our direct-
to-consumer sites across our portfolio of own-brands
and retail destinations. Understanding our customers and
how they like to purchase, discover new products, and be
made aware of new trends and solutions is essential for
developing our brands and ensuring they are relevant to the
markets they operate in.
We aim to enable a simplified customer journey, from
product discovery to checkout and delivery, which supports
our consistently strong online repeat-purchase rates within
our Beauty and Nutrition Divisions.
We continue to leverage our technology and operating
infrastructure to deliver deep local relevance in the markets
we operate in. For our customers and consumers, delivering
innovative products relevant to local markets and tastes,
together with a localised delivery proposition, has been
key to our strategy of domestic and international growth.
This was demonstrated in 2022 through new product
development and partnerships across Beauty (Sol de
Janeiro), Nutrition (Perfect Day) and Ingenuity (Bynder).
We are passionate about customer experience at THG and
our CX Operations became a finalist in the European Call
Centre Management Association in 2022, impressing the
judges with workload management, efficiency, and process
documentation.
Brand building through THG Media
We were proud to win the Shopping App Campaign
category at the App Growth Awards 2022. We first launched
our apps in 2019, and by the end of 2020, we had almost
2 million downloads. In 2022, we hit 10 million downloads
worldwide in multiple languages across our many brands,
with app sales accounting for 13% of Group D2C sales (7%
in FY 2021).
A huge contributor to this growth has been our marketing
strategy which has focused on creating exclusivity in our
apps. We also build dedicated plans around campaigns to
ensure customers download our apps before key trading
events to unlock exclusive offers, early access and new
product launches.
Our proprietary customer service solution THG Orbit
facilitates effective customer communication and order
management across the Group. During 2022, THG Orbit
integrated with social media platforms including Facebook
and Twitter, enabling brands to manage conversations
via those channels all-in-one platform, while delivering an
overarching view on key themes and trends. Investment
in efficiencies such as artificial intelligence suggested
templates and pre-populated content have driven
improvements in response times, and importantly, a
streamlined process for customer service agents. THG Orbit
is evolving into a market-leading contact centre as a service
product enabling Ingenuity clients to elevate customer
management while driving efficiency gains and supporting
customer retention through greater satisfaction levels.
Key Outcomes
• Over 16 million active THG Beauty
and THG Nutrition customers
• Improvement in customer service SLA -
average customer response rate of 98%+
• CX operations were successful in being a finalist
and a silver award winner in the 2022 UK Call
Centre Management Association awards
• Passed customer service excellence audit gaining
6 additional compliance+ marks
• Integration with Apple Pay launched across 12
own-brand apps driving higher checkout rates
50
49
Annual Report 2022
The Board keeps under review its governance and operating
protocols to ensure long-term value creation is maintained.
The application of the Code has reinforced this approach
and the underlying governance controls and processes that
embed the ethos of Section 172 across the Group.
Principal decisions
Detailed below are examples of the key discussions and
principal decisions taken by the Board during 2022 in the
context of the Group’s strategic priorities and the stakeholders
considered. In addition, the Board monitors principal and
emerging risks. Where such risks impact key stakeholders,
the Board will engage with those affected accordingly.
THG Strategic Priorities
Board discussions
and principal decisions
Stakeholders considered
Build category leadership positions in
beauty, health and wellness
• Oversight of the integration strategy
for the acquisitions made during 2021,
including Cult Beauty and Brighter Foods
• Divisional reorganisation to simplify the
Group’s operating and reporting structure
• Support for the decision to consolidate
the UK warehouse network to realise
efficiencies from automation
• Appointment of Lucy Gorman as Beauty
Chief Executive Officer and internal
promotion of Neil Mistry to Nutrition
Chief Executive Officer
To make Ingenuity the partner of choice
for commerce transformation and
sustainability solutions
• Monitoring of the separation
of the Group’s business units
• Appointment of Vivek Ganotra
as Ingenuity chief executive officer
• Review of the ongoing enhancements
to the Ingenuity platform with a particular
focus on cybersecurity
• Development of THG Orbit,
its integration with social media
partners and Ingenuity clients
Shareholders
Customers and Consumers
Our Suppliers and Partners
Our People
Shareholders
Society and Communities
Customers and Consumers
Our Suppliers and Partners
THG Ingenuity Clients
THG Strategic Priorities
Board discussions
and principal decisions
Stakeholders considered
Deliver engaging content and innovative
products to our global customer base
• The Board supported the partnership
between THG Nutrition and Iceland
• Regular review of the innovation and new
product development pipeline
• Development of THG Media strategy
Accelerate growth in core international
territories, leveraging our local
infrastructure
• Monitoring progress of the final stages
of the expansion of the Group’s global
warehouse and fulfilment network
• The Board reviewed and approved the
updated Treasury Policy and Tax Strategy
• Support for investment in US warehouse
automation in New Jersey
Drive positive change with our
stakeholders, through an entrepreneurial,
values-led culture
• The Board approved the addition of the
fifth Company value ‘Collaboration’
• The Board approved the evolution of the
Company purpose following engagement
with employees across the organisation
through the employee value proposition
• The Sustainability Committee
monitored progression against the 2030
Sustainability Strategy and, in line with the
Group’s climate and nature targets, during
2022 our baseline carbon footprint was
established based on 2020 data and net
zero targets were submitted to the SBTi
for approval
Our People
Shareholders
Society and Communities
Customers and Consumers
Our Suppliers and Partners
THG Ingenuity Clients
Shareholders
Society and Communities
Customers and Consumers
Our Suppliers and Partners
THG Ingenuity Clients
Shareholders
Society and Communities
Customers and Consumers
Our Suppliers and Partners
THG Ingenuity Clients
51 52
Annual Report 2022
Principal decision by the Board
In October 2022 it was announced that, following
Board approval, the Group had entered into an
incremental £156 million banking facility.
£156 million term loan facility
agreement entered into in
October 2022
Stakeholders considered
Stakeholders considered
Shareholders
Shareholders
Customers and Consumers
Customers and Consumers
Our Suppliers and Partners THG Ingenuity Clients
Divisional reorganisation Strategic review
Stakeholders considered Stakeholders considered
Shareholders ShareholdersCustomers and Consumers Customers and Consumers
Our Suppliers and Partners Our Suppliers and PartnersOur People Our People
THG Ingenuity Clients
Principal decision by the Board
In October 2022, it was announced that the Group
had placed THG OnDemand under strategic review,
with the objective to scale back dilutive results within
non-core divisions. This review is now complete and
these operations will be fully exited by the end of
Q3 2023. Subsequently; the Board commenced a
strategic review of trading activities outside of THG
Beauty, THG Nutrition and THG Ingenuity.
Principal decision by the Board
In May 2021, it was announced that the Group
was re-organising its legal structure to enable
underlying reporting companies to align with
business divisions and brands, and support
THG’s long-term growth strategy.
Board considerations and outcome
The Board considered that reorganisation would
accelerate investment in divisional growth plans
and support expansion over the medium-to-long
term, as in some cases the current structure did
not align with the business activities. A Board
sub-committee was established to act in the interest
of stakeholders which received regular updates
on progress and key developments.
The transformation activity which was completed
during 2022 delivers value for Shareholders and
provides visibility over the profitability of each
Division. The Group will disclose further financial
information on its segments during 2023.
Investment in price
protection strategy
Principal decision by the Board
In September 2022 it was announced that, in
response to the adverse macroeconomic conditions
and a period of unusually high-raw material costs
(principally whey), the Group had reviewed its trading
strategy and a decision to partially shield consumers
from inflationary pressures was implemented.
Board considerations and outcome
The decision to pass on input cost inflation at a lower
rate to consumers was considered in conjunction
with the strategic priority to build category leadership
positions in beauty, health and wellness.
Whilst the Board noted the decision would have an
impact on gross margins, as commodity prices ease,
the Group remains well positioned to expand margins
back in line with historical periods. As cost-of-living
pressures rise, customers are continuing to prioritise
beauty, health and wellness categories and, through
investing in bringing them into and retaining them
within the THG ecosystem, long-term value for
Shareholders is considered.
Board considerations and outcome
The Board considered that the strategic review would
deliver a simplified proposition to ensure the Group can
focus resources and capital on delivering the largest
opportunities available. Senior Management developed
a working group and presented the opportunities
available to the Board for further consideration.
Following review, the Board approved the proposal
to exit certain categories and territories which were
delivering loss-making results. The revenue and EBITDA
loss contributed from these areas has been disclosed
separately within the financial results to show the
impact of these decisions on the outlook of the Group.
The exits are underway and are expected
to be completed by the end of H1 2023.
Board considerations and outcome
The Board considered the terms and long-dated
nature of the facility would provide the Company
with considerable financial flexibility and additional
capital to drive its strategic priorities, principally
accelerating growth in core international territories
whilst leveraging our local infrastructure.
The facility was drawn down in October 2022
with the proceeds to be invested for the benefit of
customers and Ingenuity clients, in areas accelerating
growth namely investment in its capital expenditure
programme. The Board also considered the interests
of Shareholders and the appropriate balance of
capital allocation priorities.
53 54
Annual Report 2022
The table below sets out where stakeholders can find information relating to the non-financial
matters as required under the Non-Financial Reporting Directive:
A review of each of the above policies is considered on an annual basis. Following our 2022 review, a number of policies
were updated where appropriate.
An integrated training and policy platform continues to be maintained, which facilitates the rollout of policies to
appropriate audiences. This platform allows subsequent monitoring of completion rates for the reading and acceptance
of these policies at an individual level, promoting awareness and conformance to our policies.
Reporting requirements Some of the relevant policies
Where to read more in this report about our
impact, including the principal risks relating
to these matters
Page
Environmental matters • Environmental policy. • Sustainability
• Sustainability Committee Report
• Task Force on Climate-related Financial
Disclosures (TCFD)
• Risk - Climate Change, Environmental
and Social Responsibility
• Risk – Legal and Regulatory Compliance
Page 57
Page 141
Page 79
Page 91
Page 90
Employees • Diversity & Inclusion Policy.
• HR Handbook including all
people-related policies.
• ‘A winning culture’ - Chair’s Introduction
• ‘Our strategy’ & ‘Our People’
• Section 172 Statement Stakeholder Engagement
• Diversity – Governance Report
• Risk - Talent
• Risk - Health & Safety
Page 3
Page 11, 74
Page 47
Page 105
Page 89
Page 91
Human rights • Modern Slavery Policy.
• Health and Safety Policy.
• Whistleblowing Policy.
• HR Handbook.
• Section 172 Statement
• Risk - Climate Change, Environmental
and Social Responsibility
• Risk - Health & Safety
• Risk - Product Safety and Quality
Page 47
Page 91
Page 91
Page 91
Social matters • HR Handbook.
• Environmental Policy.
• Section 172 Statement
• ‘Empowering people and communities’ –
Sustainability
• ‘Our People’
• Diversity – Governance Report
• Risk - Climate Change, Environmental
and Social Responsibility
Page 47
Page 71
Page 74
Page 105
Page 91
Anti-Bribery and Corruption • Anti-Bribery Policy.
• Gifts and Hospitality Policy.
• Risk – Culture Page 92
Business model • Our business model Page 13
Non-financial KPIs • Non-Financial KPIs
• Sustainability
Page 22, 27
Page 57
Principal risks and
uncertainties
• Risk Management Page 87
Non-financial information
Policy Description
Environmental policy THG is committed to doing business responsibly and reducing any adverse impacts of our operations on the
environment. Our Environmental Policy was implemented as part of our THG Sustainability Strategy (THG x
Planet Earth) to drive positive change in our business, supply chains, communities and for the planet.
Diversity & Inclusion policy THG strongly believes that having a diverse workforce and an inclusive workplace creates a more innovative
and successful business. In 2022, we launched our Diversity & Inclusion (D&I) strategy, implementing a
range of initiatives built around our four pillars: visibility and representation, learning and development,
recruitment and progression, and accessibility and inclusion. Our D&I Policy has been implemented as part
of the D&I strategy and reflects our ongoing commitment to equal opportunity.
Modern Slavery policy THG has a zero-tolerance approach to modern slavery, and we are committed to acting ethically and with
integrity in all our business dealings and working relationships. THG’s Modern Slavery Policy reflects its
commitment to acting ethically and with integrity in all its business relationships and to implementing
and enforcing effective systems and controls to ensure slavery and human trafficking is not taking place
anywhere in its operations and supply chains.
Health and Safety policy THG takes a proactive approach to managing Health and Safety and our policy outlines the commitment of
THG and the expectations of managers, the leadership team and all colleagues. Our approach is for “Zero
Harm, Zero Compromise”.
Whistleblowing policy Our aim is to operate properly, responsibly and ethically whilst encouraging a free and open culture in
dealings between employees and all people with whom we engage. In order to protect our people, assets
and information, we recognise that effective and honest communication is essential if concerns regarding
breaches or failures are to be effectively dealt with and the company’s success ensured. THG whistleblowing
service is a free and professional service that enables all employees to raise their concerns confidentially. The
service is available to all THG staff, agency workers and contractors. An update on all whistleblowing cases
is provided to the Audit Committee on a quarterly basis. This update provides details on the investigations
undertaken and the outcomes of these investigations.
Anti-Bribery policy THG is committed to conducting its business with complete integrity and in a manner which ensures
compliance with all applicable laws and with the highest ethical standards. As a company, we use our best
endeavours to ensure that all those acting on our behalf, whether they are employees, contractors, third-
party intermediaries or agents, are aware of and share our commitment to conducting business ethically.
Our Anti-Bribery Policy summarises the Company's position in relation to ethical standards, including
bribery.
Gifts and Hospitality policy THG considers the offering and receipt of corporate hospitality to be a part of establishing and enhancing
good relations with our business partners, including suppliers, customers and other business partners.
However, giving or receiving hospitality or gifts which are excessive or inappropriate does not help to build
good relations and may create the impression of undue pressure or improper influence. This could damage
our reputation. In some cases, gifts or hospitality may be considered to be bribes under applicable Anti-
Bribery law, with consequent criminal penalties. It is therefore essential that our employees and Directors
comply with this policy whenever giving or receiving gifts or hospitality to or from the Company's business
partners, or otherwise in the context of the Company's business.
55 56
Annual Report 2022
As a global vertically integrated business, we are acutely
aware of the impact large organisations have on the
planet, and the great responsibility and influence we hold
with our people, communities, suppliers and customers
both in the UK and internationally. We have always been
focused on reinventing online retail for the better and are
committed to use our global scale, our world-class talent
Our Sustainability Strategy is centred
around three priorities:
Sustainability
Materiality assessment
It is important to assess and understand the potential
challenges and opportunities, as well as the topics,
that are most important to THG and its stakeholders.
In early 2021, a materiality assessment was undertaken
which led to the development of the Company’s first
Sustainability vision and strategy. To define the material
topics most relevant to THG, senior internal stakeholders
and external investors were engaged to gain an
understanding and view as to the most material issues
that could affect the Company’s operations, both now and
in the future. The goal was to obtain a complete picture
of the environmental and social sustainability impacts,
resulting in a set of prioritised material issues. Five key issues
were identified including: Climate, Nature, Waste, Supply
Chain and People – these formed the foundations of our
Sustainability Strategy, THG x Planet Earth.
The full list of issues, and the process behind the materiality
assessment, can be found in last year’s Annual Report,
pages 89-90.
Protecting Climate
and Nature
01.
02.
03.
Strengthening our
Supply Chain and
Circularity
Empowering People
and Communities
Since the launch of THG x Planet Earth in October 2021, we
have been laying the foundations to ensure we can deliver
the ambitious targets set under each of these priorities.
We have made good progress in many areas including;
submitting our net zero plans to the Science Based Targets
initiative (SBTi) for approval, which is detailed in the Climate
section on page 61. We have evolved our sustainability data
management and reporting, by building a sustainability
data management and reporting platform with an external
partner. This has enabled us to gain greater insight into our
sustainability performance, allowing us to not only capture
and report on data, but also track and analyse progress.
Better sustainability data management and reporting unlocks
the ability to report on sustainability-related disclosures
and help other parts of the business to deliver sustainability
programmes such as energy forecasting and site-level
energy efficiency plans. Our enhanced sustainability
reporting capabilities have allowed us to report on new
sustainability metrics for the first time, such as the number
of sites in water-stressed areas. As we develop the platform
further, we will report on a greater number of metrics over
time which is integral to reaching our goals and targets as
set out in THG x Planet Earth.
Throughout 2022, we strengthened our sustainability
expertise, building a wealth of skills, knowledge and passion
to lead group-wide initiatives within our strategy, alongside
the development of our sustainability reporting and data
management approach.
There is still more to do, but we remain on track to deliver
many of our goals and targets within our THG x Planet Earth
Strategy. We are proud to share the progress against the
targets in this report.
As previously communicated, to ensure our strategy and
targets remain relevant, the targets will be reviewed, and
if required, updated, at least every two years (next review
scheduled for 2023). As per our sustainability governance
process, any changes will be reviewed by the senior
leadership team, the Sustainability Committee and
submitted to the Board for final approval.
and our dedication to innovation, to act as a force for good.
Collective action is required to address global issues such
as climate change and social inequality, and in the past
few years we have seen governments and corporates
set ambitious goals to tackle such issues. At THG, we are
committed to do our part and work with all our partners
to become more sustainable, together.
THG x Planet Earth
Against the challenging external backdrop of increasing
severe weather events and global economic issues,
we remain committed to driving forward the Group’s
Sustainability Strategy, THG x Planet Earth, to achieve
our sustainability vision:
To act as a force for good in leaving the world a better place than
we found it, by using our scale, our partnerships, our access to
capital and our unique capacity for innovation to promote and
embed sustainability into everything we do.
Female representation
in Apprenticeship and
Graduate schemes
2022 Impact
Renewable electricity
use across our operations
63%
Ethnic minority representation
in Apprenticeship and
Graduate schemes
26%
45%
Ethical Audits conducted
on our supplier factories
390
57 58
Annual Report 2022
CLIENT CASE STUDY
The challenges of taking effective climate action inspired
THG to establish THG Eco: a dynamic service solution
based on the purpose-led proposition of ‘simplifying
sustainability’. THG Eco simultaneously powers THG’s wider
sustainability targets, while also providing uncomplicated
and cost-effective sustainability services to our clients,
partners and suppliers. We break down the mammoth task
of facing an opaque and misunderstood market, facilitating
investment in practical and transparent solutions that serve
businesses throughout their sustainability journey.
The primary focus of THG Eco in 2022 has been to assist
our network in taking climate action. By establishing a
THG Eco
Ideal Standard is a multinational manufacturer of
sanitaryware products, headquartered in Belgium.
To align with an increasingly environmentally-
diligent market, Ideal Standard set out to measure
and set meaningful actions and targets to reduce
their greenhouse gas (GHG) emissions across their
manufacturing network in 2021.
They worked with THG Eco to collect and analyse GHG
data across their global network of 13 manufacturing
sites and offices. Guided by GHG Protocol requirements,
Ideal Standard and THG Eco analysed their Scope
1, 2 and partial Scope 3 emissions, covering fuel
and energy-related activities, employee commuting,
shipping, waste, inbound water and business travel.
THG Eco worked with Ideal Standard to develop
an approach that would produce a meaningful and
representative GHG Report. Where data was not
available, THG Eco collaborated with local teams to
outline alternative solutions. Where this was still not
possible, industry-standard emission factors were
cyclical process, we have helped our suppliers accelerate
change within their own supply chains to collectively
mitigate climate risk, while also reducing operational costs.
Our support for our network starts with annual carbon
footprint measurement and analysis, life cycle assessments
through to net zero target setting and SBTi submissions.
We pave the way for emissions reduction through
renewable energy certifications, carbon offsetting and net
zero road mapping.
Our recent work with Ideal Standard exemplifies how
businesses gradually leverage change using our cyclical
sustainability model:
sought and applied, following extensive research.
This data was included in the final GHG Report, along
with the source of each emission factor to support
calculations and highlight where further clarity could be
sought when completing the exercise, the following year.
THG Eco ran a series of virtual workshops for 100+ Ideal
Standard employees both before and after the carbon
footprinting exercise. The sessions before the activity
were designed to educate and encourage participation,
while the sessions after delved into the report’s results
and feasible next steps. Both were very well received.
THG Eco’s final GHG report broke down Ideal
Standard’s emissions by location and scope. This
PARETO hotspot analysis pin-pointed areas of the
business with concentrated emission output, allowing
Ideal Standard to make strategic, operational decisions
to reduce their footprint. THG are now exploring next
steps with Ideal Standard to recalculate Scope 1, 2
and full Scope 3 emissions across 2022 data to review
reduction activities and work towards carbon neutrality.
Recognising the urgency to take action against climate
change, Protecting Climate and Nature is the first of the
Group’s three key priorities outlined in THG x Planet Earth.
Our priority around these issues echoes the sentiment
shown at COP27 and the 15th Biodiversity Conference,
highlighting the need for everyone to take action, including
1. Measured by % spend.
Climate and Nature Performance in 2022 Status
Submit net zero baseline and targets
for validation by SBTi by 2022
Science-based targets submitted to SBTi for validation Complete
Offset all of THG’s direct historical
emissions by 2025
- On track
Transition to 100% renewable
electricity for own operations by 2025
63% of our electricity is from renewable sources On track
50% of suppliers and THG Ingenuity
partners
1
to set carbon reduction
targets by 2025
48% of our own-brand top 50 suppliers (by 2022 spend) are
working on carbon reduction and climate-related initiatives.
In 2023, we aim to start collecting data on suppliers who
have set carbon reduction targets specifically
On track
100% sourced agricultural materials
to be deforestation-free for own-
brands by 2025
- Due to
commence
in 2023
Top 20% of own-brand suppliers
(by impact
1
) to introduce restorative
agricultural practices by 2030
- Due to
commence
in 2023
30% reduction of water use in
water stressed and own operation
sites by 2030
We identified 13 sites located in water stressed areas
and 4 sites located in high-risk flood zones
On track
25% of own-brand product and
ingredient suppliers to disclose
water usage and adopt water
stewardship by 2030
34% of own-brand top 50 suppliers (by 2022 spend) are
working on water reduction and stewardship initiatives
On track
Protecting Climate
and Nature
Targets
businesses like ours where we have a global footprint.
THG operates in multiple categories and across the whole
value chain – which is why we have set ambitious targets
around carbon, water and nature that apply, not only to
ourselves, but also to our supply chain partners.
THG Eco supports Ideal Standard to improve GHG reporting
59 60
Annual Report 2022
Climate risk
Given the significant risks climate change poses to the
planet, it is important to understand how this may also
impact THG’s business activities. We are committed to
report in alignment with the Taskforce on Climate-Related
Financial Disclosures (TCFD) framework. Our disclosure
and progress towards full TCFD alignment can be found
on pages 79-82.
Renewable electricity
In 2020, we switched many of our UK sites to renewable
electricity contracts. This contract was recently extended
which will increase the number of sites using renewable
electricity over the coming years and is a big driver behind
our current figure of 63% of electricity from renewable
sources. We also have solar panel installations at some
of our manufacturing sites. However, we know there
is much more to do. As our international operations
continue to grow, we must look at ways of increasing
our use of renewable electricity beyond the UK. We are
actively investigating employing instruments, such as
power purchase agreements and further on-site energy
generation from solar, both in the UK and across our
international sites as part of our target to achieve 100%
renewable electricity usage by 2025.
Supplier engagement
on carbon reduction
The majority of THG’s carbon emissions lie within our value
chain and we recognise the importance of addressing our
sustainability targets in this area. Following our carbon
footprint measurement and assessment, the need to
focus on Scope 3 emission reduction was clear. Scope 3
represents 98% of THG’s total emissions, with suppliers of
third-party finished goods and raw materials of THG brands
contributing a significant proportion of this. During 2022,
significant progress was made in gathering data relating
to these suppliers, with 48% of these top 50 suppliers (by
spend) confirming they are actively engaged in carbon
emission reduction and climate-related initiatives in 2022.
Focusing on the top 50 suppliers allows us to strategically
address those suppliers with the largest impacts. By the end
of 2023, we aim to report how many of these suppliers have
set specific carbon reduction targets.
We continue to develop systems to support the collection
of wider supply chain sustainability data such as supplier
attributes; credentials related to carbon emissions,
deforestation, water stewardship and waste. This will
enable the assessment of a baseline position and tracking
performance against supplier-related targets aligned
with THG x Planet Earth. We have expanded the supplier
sustainability assessment criteria and incorporated it into the
newly-developed supplier portal tool which will be rolled out
in 2023. All new and existing suppliers will also be engaged
and required to complete a more rounded sustainability
assessment. In turn, this exercise will provide a deeper
understanding of potential gaps and risks in our supply
chain, which can then be addressed accordingly. We aim to
have all finished goods and raw material suppliers complete
the sustainability assessment by the end of 2023.
Science-based targets
At THG we have set ambitious targets to be climate positive
and address the environmental impact of our greenhouse
gas (GHG) emissions. Throughout 2022, we established
our baseline carbon footprint, based on 2020 data, and
submitted our net zero targets to the Science Based Targets
initiative (SBTi) for approval. We are scheduled to receive the
outcome of our submission in the second half of 2023. In the
meantime, we are developing detailed divisional roadmaps
to drive delivery of our carbon reduction commitments. We
submitted both near-term and long-term targets, with the
aim of achieving net zero emissions by 2040. This goal is a
further demonstration of THG’s desire to make a significant
change to the world in which we operate.
Value Chain (Scope 3)
Emissions Baseline
The development of science-based targets requires
robust and comprehensive calculation of all greenhouse
gas (GHG) emissions to identify where we need to target
our efforts. GHG emissions are split into three categories:
Scope 1 emissions, which are GHGs released directly from
an organisation; Scope 2 are indirect emissions which are
released from the energy purchased by an organisation; and
Scope 3 emissions, which are also indirect GHG emissions,
and aren’t directly controlled by the organisation but are
related to their activities.
Achieving net zero requires changes across all business
areas - Scope 3 emissions comprise the largest portion of
our carbon footprint and account for around 98% of THG’s
total emissions. This is primarily driven by purchased goods
and services, alongside upstream transport and distribution.
It will require significant, ongoing engagement and
collaboration with our suppliers to drive emissions reduction
across this category.
We will track our progress against all GHG emission
categories, to ensure we achieve our 2040 net zero target
and will report our Scope 3 emissions on a periodic basis,
alongside our regulatory obligations to report Scope 1 and 2
emissions, providing increased visibility of our performance
in this area.
Climate
Value Chain (Scope 3) emissions
by source for 2020 baseline
68.1% Purchased goods and services
8.2% Capital goods
2.2% Fuel and energy-related activities
16.6% Upstream transport & distribution
0.2% Waste generated in operations
0.03% Business travel
1.7% Employee commuting
1.0% Upstream leased assets (data centres)
1.2% Use of sold products
0.7% End-of-life treatment of sold products
Electricity used to power
our operations in 2022
Non-
Renewable
37%
Renewable
63%
61 62
Annual Report 2022
The Group’s GHG emissions reporting calculation is undertaken in line with our obligations within The Companies Act 2006
(Strategic Report and the Directors’ Report) Regulations 2013, and the Streamlined Energy & Carbon Reporting regulations,
March 2019. GHG emissions are reported in accordance with the GHG Protocol. The reporting year for GHG emissions in
the Group ran from 1 January 2022 to 31 December 2022.
THG’s GHG emissions and energy reporting
GHG emissions (Tonnes of CO2e) 2022 2021 2020
1
Scope 1 emissions
Generated from the gas and oil used in buildings
where the Group operates; emissions generated
from Group owned and operated vehicles for
business travel
5,194
2
2,309 1,946
Scope 2 emissions
Generated from the use of electricity in all
buildings from which the Group operates.
13,238
2
11,605 9,584
Total 18,432 13,914 11,530
GHG Intensity per £1m revenue 8.23 6.39 7.1 4
Energy use (kWh) 2022 2021 2020
1
Natural Gas 23,275,342 12,051,833 9,943,330
Electricity 39,358,032 28,653,493 19,649,394
Fleet and On-Site Fuel 3,889,419 590,717 488,578
Total
66,522,793
2
41,296,043 30,081,302
Energy Intensity per £1m revenue 29,707 18,952 18,638
Energy use (kWh) 2022 2021 2020
UK 42,682,049 23,332,220 16,833,917
Overseas 23,840,744 17,963,822 13,245,455
Total
66,522,793
2
41,296,042 30,079,372
1. Minor revisions (not material) to reflect SBTi targets submission.
2. Assured by Bureau Veritas – for further details please see our Reporting Basis document.
Note: Table subject to rounding.
Emissions and energy consumption figures in 2022 are
higher than previous years, due to a combination of
factors: 1) increase in operational activity due to business
growth and 2) improvement in data-capturing processes,
availability and quality.
In 2022, we continued the purchase of renewable
electricity certificates at several UK sites, and also
installed LED lighting at our acquired sites to improve
energy efficiency. By building our sustainability reporting
platform we can focus on tackling energy use at our
highest consuming sites, and the enhanced data
capabilities mean we can also now report on our Scope 2
market-based emissions.
Details on how we calculate our GHG emissions and
energy can be found in our Basis of Reporting document.
We reported the above emissions on a location-based approach in line with the GHG Protocol. Following a market-based
approach, our Scope 2 emissions for 2022 were 9,157
2
tonnes of CO2e and our total Scope 1 and 2 tonnes of CO2e were 14,351.
Energy use by source (kWh)
– Scope 1 and 2)
Renewable
Electricity
24,704,347
Non-Renewable
Electricity
14,653,685
Natural
Gas
23,275,342
Fleet and On-Site Fuel
3,889,419
64
63
Annual Report 2022
Nature
Responsible sourcing
Supporting our goal to have a net positive nature impact
across our brands, we have made the commitment to
achieve 100% of our sourced agricultural materials for our
own-brands to be deforestation free by 2025. Deforestation
continues to drive biodiversity loss, habitat damage and also
contributes to global warming, so reducing our impact on
this devastating practice will be a key focus for THG in 2023.
We have a duty to ensure our supply chain is responsible,
ethical and does not adversely affect people or the planet.
The goals we have set within our strategy focus on
protecting human rights, eliminating modern slavery within
our supply chain, and ensuring we can transform the waste
from our operations into resources.
Strengthening our
Supply Chain and Circularity
We have made significant progress with our ethical
sourcing outreach programme, reaching out to every
one of our own-brand suppliers as part of our outreach
programme. We have also calculated the baseline position
for the packaging to understand the current levels of
recyclability, and developed a roadmap to drive towards
100% recyclable packaging by 2025.
Supply Chain and Circularity targets Performance in 2022 Status
Implement a progressive Human
Rights Policy by 2023
We are developing a standalone Human Rights Policy, and in
parallel we have implemented new ethical standards across
our supply chain and are embedding the process across
internal stakeholder groups.
On track
All own-brand goods suppliers to
commit to THG’s ethical sourcing
standards by 2025
THG has an extensive supply chain, consisting of finished
goods and raw materials suppliers split across THG branded
and third-party brands sold on our THG online platforms.
In 2022, attention was focused on own-brands’ suppliers
of finished products, and raw materials contributing to the
make-up of these products. Throughout 2022, 78% of these
suppliers committed to THG’s Ethical Code of Conduct
which outlines the ethical sourcing standards.
On track
100% of own-brand packaging
to be recyclable, reusable or
compostable by 2025
A baseline assessment of packaging across the three
key divisions: THG Beauty, THG Ingenuity and THG
Nutrition was undertaken in 2022. Roadmaps have been
developed to identify the key milestones and actions to
drive target delivery.
On track
Zero waste to landfill from
our own operations by 2030
Collection of waste data across all sites began towards
the end of 2022. Full waste data collection and analysis
relating to all global sites will be completed in 2023.
In 2022, our Poland facility, one of our largest manufacturing
and fulfilment sites, sent zero waste to landfill.
On track
We recycle more plastic than we
produce by 2030
The amount of plastic we use was collated in 2022, based on
2021 data, as part of the data collection to assess recyclability
of our own-brand packaging. This work will continue in 2023
to establish our baseline position as we compare this with
the plastic recycled across THG’s three recycling centres.
On track
70% of packaging from third-party
brands to be recyclable, reusable or
compostable by 2030
Many of the brands THG partners with are already
taking positive action and increasing the recyclability of
their packaging. During 2023, a baseline position will be
established to understand and determine where further
engagement is required.
On track
Water
Water use in our operations
In late 2022, we began collecting data around water use
across our sites, which has enabled us to start working on
calculating a baseline for our water reduction target.
To improve water data quality, we are exploring the
installation of automatic meter readers across several UK
sites, with implementation expected to begin in 2023.
We have mapped out sites which are located in water-
stressed areas using the WRI (World Resources Institute)
Aqueduct tool – the results indicate 13 sites are situated
in water-stressed areas. However, we are aware that in
the future this may change, and we will continue to look
at water efficiency measures across all sites. In addition
to water stress, we also looked at sites located in 100-
year flood zones, with results showing that only 4 sites
are in such zones – again we will monitor this carefully. In
2023, we will undertake climate-risk modelling as part of
TCFD recommendations which will further enhance our
understanding of climate-related risks such as water stress.
Supplier engagement on water use
Water stewardship across our supply chain is an important
area for us to tackle, especially given the growth of our
business and global nature of our partners and suppliers.
While we have been obtaining data across own-brand raw
material and finished goods suppliers, in order to focus
our efforts on where we have maximum impact, we have
assessed supplier performance associated with water use for
those aforementioned Top 50 suppliers (by spend) – in 2022,
34 of those suppliers were conducting activity around water
stewardship and reduction.
As we develop our deforestation strategy, there will be a
specific focus on palm oil and palm-derived products, given
the widely known concerns between the two. Our approach
to sourcing palm oil and palm products will be reviewed and
we will develop a group-wide policy, to drive a consistent
approach across all areas.
65 66
Annual Report 2022
1. Gifts, Luxury, Homeware & Apparel.
CHINA
INDIA
27%
2%
2%
16%
27%
6%
3%
8%
3%
2%
4%
UK
GERMANY
TURKEY
POLAND
OTHER
COUNTRIES
ITALY
FRANCE
NETHERLANDS
USA
In line with our Supply Chain Mapping & Ethical Outreach
Programme, at the beginning of 2022, supplier outreach work
started on own-brand raw materials and finished goods suppliers
(excluding acquisitions). From June 2022, the programme was
extended to include all THG acquisitions.
As of 2022, we have reached out to every own-brand raw
materials and finished goods supplier and successfully mapped
out production units among 62% of suppliers. A breakdown
of manufacturing units across the top-10 sourcing countries is
illustrated on the map:
Supply Chain
Mapping
Percentage of factories
in each country
Divisional breakdown
by country
China
United Kingdom
United States
Germany
India
Netherlands
Italy
France
Poland
Turkey
Other Countries
Key
Nutrition
Beauty
Packaging
Other
1
67 68
Annual Report 2022
Human Rights
During 2022, the supply chain sustainability team focused
extensively on implementing new ethical standards across
our supply chain and embedding the process across
internal stakeholder groups. Legacy suppliers were engaged
alongside all new suppliers. Our key areas of focus were:
• Supply chain ethical sourcing process development
and implementation including - due diligence
and prerequisites such as new supplier validation,
continuation of our SEDEX (an international ethical
supply chain assessment platform) membership,
capabilities and accreditation assessments, and
mandatory third-party ethical audits.
• Modern slavery and human rights – including
development and implementation of THG’s Ethical
Code of Conduct and ethical requirements agreement,
internal audits, a tailored labour & modern slavery audit,
as well as a supply chain ethics onboarding policy for
direct & indirect procurement.
• Supply chain mapping and transparency programme
– engaged THG branded goods and raw material
suppliers in a global outreach programme designed to
successfully map our supply chain.
• Supplier onboarding portal – development of THG
supplier portal expected to be rolled out and integrated
into supplier onboarding/management in 2023.
• Awareness and training – procurement teams received
training on the importance of human rights across the
supply chain and their role in ensuring THG responsibly
source new suppliers across procurement.
Supplier commitment to our
ethical sourcing standards
We have been building the foundations and outlined the
principles of THG’s ethical sourcing programme, an Ethical
Code of Conduct, with reference to International Labour
Organisation (ILO) standards. Own-brand suppliers are
expected to acknowledge the values and standards set out
around ethics and supply chain transparency, by signing, as
well as delivering the requirements to their corresponding
upstream suppliers.
The programme includes the ethical sourcing onboarding
process, whereby all new suppliers are required to fulfil
minimum requirements. Pre-requisites comprise validation
of credentials, supply chain mapping, SEDEX membership,
third-party ethical audit and risk assessment.
Current approved suppliers are also held to the same
standards within their approved life cycle. All suppliers
must adhere to the standard set out within the ethical
programme on a continuous basis. Suppliers not committed
to the programme are escalated to Senior Management for
business review.
In the first year of our ethical supply chain programme, 514
suppliers, equivalent to 78% of our own-brand raw materials
and finished goods suppliers, signed up to our Ethical Code
of Conduct. Looking beyond 2022, we are striving towards
having 100% of our own-brand finished goods and raw
material suppliers engaged in the programme and aligned
to our ethical audit requirements. In 2022, we obtained and
reviewed 390 ethical audits from supplier factories - 44% of
our factories were audited and all new factories onboarded
are now subject to audit. As our ethical supply chain
programme develops, we will continue to build our audit and
engagement capabilities with our suppliers.
Recycling our plastics
During 2022, the baseline position for the packaging we
place on the market was established using 2021 data. In
2023, our aim is to compare the amount of plastic recycled
through our THG Eco recycling companies with the amount
of plastic placed on the market by THG brands. This will
include assessment of the differing polymer types to ensure
like-for-like comparisons and enable the development of
roadmaps to deliver the target by 2030.
Third-party brands packaging
In addition to setting packaging recyclability targets for all
own-brand products, THG has also committed to engaging
with suppliers with the aim of improving the recyclability
of packaging used in third-party finished products. Many
third-party suppliers have already started to make changes
to their packaging and in 2023 THG will commence a
proactive programme to engage with the suppliers of third-
party brands to fully understand what level of change is
required to drive progress in this area, ahead of 2030.
Own-brands plastics and packaging
Plastic pollution is a world-wide issue, requiring urgent
and consistent action to reduce the volume of plastic
waste which significantly impacts natural habitats on land
and in the ocean. Around 36% of all plastic produced is in
packaging and around 85% of this ends up in landfill
or as unregulated waste, which isn’t subject to waste
controls. The issue around plastic is not only about waste;
most plastic is derived from fossil fuels and therefore the
continued increase in the use of plastic, and particularly
virgin plastic, results in greater greenhouse gas emissions.
At THG, we are committed to playing our part in addressing
this global issue by ensuring our own-brand packaging
is 100% recyclable by 2025. THG is a member of the UK
Plastic Pact, and along with more than 120 businesses
and organisations from across the entire plastics value
chain, has also committed to increase the level of recycled
content within our packaging to at least 30%, which will see
a reduction in the amount of virgin plastic placed on the
market, but also a reduction in carbon emissions. In 2022,
we assessed the recyclability of all packaging across our
largest divisions to establish a baseline position and have
developed roadmaps to drive the delivery of the targets over
the next three years. We have already made changes to our
Lookfantastic Subscription Beauty Box to reduce the amount
of packaging and ensure the outer box is 100% recyclable –
read our case study on page 23.
Waste in our operations
The ability to manufacture products in-house gives us an
edge, being able to quickly develop innovative and improved
products by responding to consumer demands and changes.
However, manufacturing operations produce waste, and it is
important that organisations take responsibility for the waste
they produce. In 2022, a group-wide waste assessment was
initiated (which will be completed in 2023) to understand the
total quantity of waste produced by THG, as well as where it
is produced and the differing types of waste. By applying the
waste hierarchy and circular economy principles, we aim to
reduce the amount of waste produced across the business,
reduce costs and ensure any waste that is produced does
not end up in landfill – in line with our target of zero waste
to landfill by 2030.
An example of our commitment to achieving this target
is illustrated by the fact that THG’s Polish fulfilment and
manufacturing facility sent zero waste to landfill in 2022.
Similarly, Myprotein studied how to utilise unused protein
powder which would have ended up as waste. By partnering
with a specialist waste recycling company, the powder is
now repurposed to become fish food used by the angling
community. Innovative initiatives such as this further
demonstrates our commitment of reducing waste and
applying circularity principles. Our responsibility doesn’t
Zero waste
stop with our own operations; we have also committed to
addressing our downstream waste - Lookfantastic, ESPA
and Cult Beauty have introduced refillable products - giving
consumers the ability to reduce their own waste footprint.
We are committed to waste reduction and circularity and will
continue to explore opportunities where we can reuse waste
and materials.
Waste types in our
Poland facility in 2022 (tonnes)
Metal: 19%
250
Mixed
Packaging:
25%
336
Organic: 4%
51
Paper
& Cardboard
Packaging: 39%
519
Plastic
Packaging:
5%
71
Wooden
Packaging:
5%
61
Other: 3%
38
69 70
Annual Report 2022
As a global business, we operate across many countries,
impacting not only the 8,000+ people that work within
the business, but also across the whole value chain from
our supply chain to local communities. The third priority
within our THG x Planet Earth Strategy focuses on three
areas – diversity and inclusion, employee wellbeing and
development and investing in our communities.
In 2022, we’ve solidified the foundations of reaching
our goals – developing our first diversity and inclusion
strategy and social impact strategy - further details
can be found on pages 77-78.
Empowering People and
Communities targets
Performance in 2022 Status
Achieve 50% female
representation and at least 20%
ethnic minority representation
in Graduate and Apprenticeship
schemes by 2025
45% female and 26% ethnic minority representation
in Graduate and Apprenticeship schemes
On track
Achieve 50% female
representation and at least 15%
ethnic minority representation
on the Board and Senior leaders
by 2030
22% female and 6% ethnic minority representation on the
board and senior leadership team
On track
Eliminate gender and ethnicity
pay gaps across all THG
divisions by 2030
Gender Pay Gap information can be found on the UK
Government online Gender Pay Gap service portal.
Ethnicity pay gap to be determined in the future as we
continue to improve on gathering more data in this area
On track
Achieve at least 15%
improvement in employee
engagement score by 2025
We will be undertaking our baseline for employee
engagement scores in 2023
Due to
commence
in 2023
Pay all direct staff, agency
workers and contractors
a living wage by 2025
70% of UK direct staff (excluding agency workers and
contractors) are paid a Real Living Wage
On track
All Tier 1 suppliers to pay
a living wage by 2025
Primary focus in 2022 has been on direct staff and we will
review this target in 2023
Due to
commence
in 2023
Provide 10,000 people in the
community with technology
and life skills training by 2030
With the introduction of the Social Impact Strategy, we
will aim to identify opportunities to support communities
through training of these important skills in 2023
Due to
commence
in 2023
Introduce two days volunteering
per year for every THG employee
by 2025
Our approach to colleague volunteering is outlined in our
Social Impact Strategy. This will be rolled out in 2023
Due to
commence
in 2023
Empowering People
and Communities
The Group’s D&I vision is to further create a diverse,
inclusive and supportive work environment, reflective of the
communities within which THG operates and comprising
talented and motivated individuals.
Diversity and inclusion goals
49%
54%
45%
Percentage of female representation in our
Graduate and Apprenticeship programmes
2020
Target to 2025:
50%
2021
2022
2020
12%
17%
26%
Percentage of ethnic minority representation
in our Graduate and Apprenticeship programmes
Target to 2025:
20%
2021
2022
20%
25%
22%
Percentage of female representation
at Board and senior leadership level
Target to 2030:
50%
2020
2021
2022
6%
6%
6%
Percentage of ethnic minority representation
at Board and senior leadership level
Target to 2030:
15%
2020
2021
2022
As part of THG x Planet Earth, we set ambitious targets
around diversity and inclusion - the performance and
progress towards these targets can be found below:
CASE STUDY
In 2022, we organised several events which aimed to
bring attention and understanding to groups which
can face discrimination and inequality. Providing
these engagement opportunities which celebrated
the identity and different backgrounds of our staff,
we hope to increase their sense of belonging
and educate the wider workforce on being more
inclusive and respectful in the workplace.
Some of the events held in 2022 included panel
and lunchtime sessions for International Women’s
Day, Lunar New Year, Pride Month and Mental
Health Awareness Week. We also hosted our first
Black History Month forum where external speakers
shared their experience and achievements in their
careers. To deepen engagement and to drive impact,
in 2022 we set up the Black Community Network
alongside our LGBTQIA+ and Allies Network which
was set up in 2021.
Engaging our people around
diversity and inclusion
71 72
Annual Report 2022
Gender and ethnicity pay gap
In 2022, the focus was on improving the quality of
employee data including gender and ethnicity which
has helped improve our diversity target progress. Better
measurement of the current situation against targets
and development of programmes allows us to build a
workplace where all employees can thrive. We report on
our gender pay gap via the UK government gender pay
gap service every year. Efforts to collect a greater range
of diversity data will continue throughout 2023 with a
goal to report on our ethnicity pay gap in the near future.
Employee wellbeing
and development
Sustainability training
Ensuring that THG’s Sustainability Strategy remains
at the heart of our business and is a clear focus for all
colleagues will continue to drive successful delivery. In
2022, a new induction session was introduced for all
colleagues so that they understand the strategy from day
one and are clear how they can play a part in its delivery.
To maintain this momentum, a series of six sustainability
learning modules were introduced, designed to
enhance colleagues’ understanding and engagement
in sustainability, the first of which was launched in late
2022. The remaining learning modules will be delivered
throughout 2023, building awareness and increasing
knowledge in various sustainability topics.
Employee engagement
Throughout 2022, colleague engagement at a divisional
level was measured - driving actions to improve our
performance where necessary. The goal is to move
to a more consistent approach across the group and
business-wide colleague surveys will be introduced in
2023, developing a deeper understanding of colleagues’
views, to learn from our successes and take actions
where we need to. Employee engagement KPIs will form
part of our People strategy moving forward.
Living wage
In 2022, 70% of UK THG staff (excluding contractors
and agency workers) were paid a Real Living Wage,
which is an hourly rate calculated according to the cost
of living in the UK by the Living Wage Foundation. In
2023, additional data will be collected regarding agency
and contractor staff, as well as staff outside the UK. We
will also build a roadmap to help achieve our target of
Our people
In 2022, we focused on developing our people and
reducing operational costs to future-proof the Group
and streamline our processes to benefit our global teams.
We developed our people through targeted training and
development programmes, focusing on digital skills, data
analysis, and leadership, all of which are critical for our
teams to succeed in today’s fast-paced environment.
We reduced costs by streamlining our processes
and optimising our people operations. This included
implementing new technology solutions such as
automation in our distribution centres which helped
us to reduce manual workloads and improve efficiency.
Supporting our people
Our goal is, and always will be, to foster a workplace culture
that prioritises our people, their personal wellbeing, and
their professional development.
To achieve this, our in-house doctor provides personalised
and virtual GP services for all THG employees globally and
delivers initiatives to support people who are struggling
with their mental health. Not only does this service give our
people access to free medical support and advice, but it
also helps us to create a culture of empathy and awareness.
Our Employee Assistance Programme (EAP) also supports
the wellbeing of our UK-based employees by providing
24/7 access to information, advice, and support.
In response to the cost-of-living crisis, we introduced free
lunches for all apprentices based on our catered sites
throughout November and December. Following positive
feedback from our apprentices and their managers, we
have extended this initiative until March 2023.
Finally, we awarded £36m of shares to 564 employees in
2022, reinforcing our meritocratic culture.
Culture
As THG evolves, we recognise that our employee value
proposition (EVP) must evolve too, and so last year, we
invited our global workforce to suggest a fifth company
value and help shape the future of THG. We received over
650 suggestions, all of which gave us a fantastic insight
into what makes THG so special, but the suggestion that
seemed to resonate with our teams regardless of role,
division, or location was “collaboration”.
Collaboration underpins everything we do at THG; it’s why
we’re a global leader that continues to challenge what is
possible. Over the next 12 months, we will be embedding
our newest value, collaboration, in everything we do whilst
continuing to bring our existing values, innovation, ambition,
decisiveness, and leadership, to life.
We will continue to develop our unique and vibrant culture,
tracking progress against employee feedback obtained
from group-wide surveys, pulse surveys, onboarding
surveys, and exit surveys, and HR data such as attrition
rate, absenteeism and employee referral rate. In 2023, we
will establish a baseline engagement score before working
towards our target of improving scores by at least 15% by
2025. To find out more about our sustainability goals and
targets, visit our Sustainability section.
Culture is a principal risk and the Board has overall
responsibility for risk management. However, as reflected in
its Terms of Reference, the Risk Committee has delegated
responsibility for the monitoring and review of the
processes and procedures in place to manage or mitigate
principal risks, including Culture.
THG colleagues captured at ICON Studios. Q1 2023.
THG colleagues captured at ICON Studios. Q1 2023.
paying all THG staff a Real Living Wage by 2025. The initial
focus around living wage is on our own staff, contractors
and agency workers where we have greater control and
influence. With regards to suppliers, this is significantly
more complex given the international nature of our supplier
base and the lack of living wage standards in many
countries. During 2023, we will continue to assess the best
approach to deliver against the target.
Investing in our communities
Training in our communities
Our innovation in technology and digital platforms allows
us to leverage our knowledge and expertise to benefit local
communities. With the development of our Social Impact
Strategy, we will aim to identify opportunities to support
communities through training of these important skills.
In 2022, THG made significant efforts to provide aid and
support to those affected by the conflict in Ukraine.
Our People teams worked diligently to provide physical
and mental health support to our Ukrainian colleagues
around the world, and our security teams helped to safely
relocate those colleagues and their families who made the
difficult decision to leave their homes in Ukraine. We also
supported our Ukrainian colleagues in the UK, including
assisting those who were making arrangements for their
loved ones to join them.
In addition to supporting our own colleagues, we
recognised the urgent need for broader assistance in the
region. Through partnering with national and international
organisations, we were able to provide product donations
via our fulfilment centre in Poland. These donations
included essential items such as food, clothing and hygiene
products, which were distributed through local partners
to the areas of greatest need.
Our approach to colleague volunteering is outlined in
our Social Impact Strategy. This will be rolled out in 2023,
providing colleagues with a clear framework for community
engagement and volunteering.
73 74
Annual Report 2022
CASE STUDY
Meet Hannah
Hannah joined THG in August after successfully
securing a place on Change 100, Leonard Cheshire’s
award-winning internship programme for university
students and recent graduates with a long-term
health condition and/or disability.
During her 3-month internship at THG, Hannah
shadowed our L&D team, designed training
sessions, delivered workshops, and attended
university events. She also worked with the other
interns we hired through Change 100 to create ‘The
Neurodivergent Forum’, a place for people across
the Group to find out more about neurodivergent
conditions, share ideas, and socialise.
After completing her internship, Hannah received an
offer to join THG as a permanent member of the
Early Careers team, supporting and developing our
grads, interns, and apprentices as they navigate the
transition from campus to office.
We asked Hannah what advice she would give to
someone completing a Change 100 placement.
Recruitment
Our talent team adapted to the demanding job market,
delivering a recruitment strategy that engaged both active
and passive candidates globally. A key part of our strategy
involved utilising our network of employees and industry
partners to identify and attract top talent. We also invested
in recruitment technology and tools to streamline the hiring
process and make it easier for top talent to apply and
connect with us.
We secured a listing in The Times Top 100 Graduate
Employers for a second consecutive year, reinforcing
our position as a top employer in the graduate market.
We proactively engaged with students from a variety of
educational backgrounds, resulting in over 250 graduate
and undergraduate hires from 56 universities.
We continued our commitment to creating an inclusive
and accessible hiring process that gives everyone an
opportunity to showcase their skills and talents, regardless
of their background or personal circumstances. This
involved delivering diversity and inclusion training to our
talent team and entering a partnership with Change 100,
an award-winning internship programme of paid summer
work placements and mentoring for disabled students
and recent graduates. Through Change 100, we have
developed our knowledge and understanding of accessible
recruitment, taking learnings from genuine experts and
applying them to our own processes.
Early Careers Assistant at THG
“Invest in your personal development and say yes to
as much as possible, especially if it involves pushing
yourself out of your comfort zone. Being open-minded
is important in any role, but it’s definitely something to
prioritise when you’re an intern.
I’m so glad that I’ve been able to get involved in new
projects, make new connections, and really shape my
role into something I’m incredibly passionate about.
I can’t wait to see what the future holds for me at THG.”
Learning & development
From our early careers talent to our senior leaders, we’re
passionate about supporting and developing our people
at every stage of their career. In 2022, our Learning &
Development (L&D) team delivered a variety of initiatives
to enhance soft skills and technical expertise across the
Group. This training was supplemented by over 5,000
hours of self-led online learning, 2,336 LinkedIn Learning
course completions, and 76,737 LinkedIn Learning video
completions.
We delivered the latest iteration of our 12-month
development programme, supporting the personal and
professional development of our graduates, interns, and
apprentices as they navigated the transition from campus
to office. Underpinned by social learning, our 2022 early
careers development programme consisted of in-person
networking events, workshops, industry talks and online
learning, giving our early careers talent access to a variety
of learning opportunities to help them go further, faster.
THG Accelerator continues to go from strength to strength
with 47 graduates joining the programme in 2022. From
Computational Neuroscience with Cognitive Robotics to
Journalism & Communications, our Accelerator cohort
introduces a wealth of diversity, experience and knowledge
to our Technology division. To date, our Accelerator
programme has developed over 150 graduates in-house,
giving THG access to homegrown tech talent whilst
addressing the digital skills gap and making tech careers
more accessible.
We launched our Leadership & Management Academy in
partnership with industry-leading training provider, Corndel.
Through the Academy, managers at all levels across the
UK were invited to apply for a place on our Level 3, Level 5
and Level 7 qualifications, all of which are accredited by the
Chartered Management Institute (CMI). Each qualification
blends coaching, training and personal development
that is tailored to our business and the individual learner,
giving our people a fantastic opportunity to develop the
knowledge, skills and behaviours needed to become a
transformational leader at THG. Our Level 7 programme,
delivered in partnership with Imperial College Business
School, gives our senior leaders access to world-class
learning opportunities and Imperial College Associate
Alumni status.
THG/Orbit, our award-winning global customer service
solution, also launched the Orbitor Programme to develop
their teams, encourage engagement, and recognise top
talent. The initiative has been embedded into THG/Orbit's
performance management process as team leaders use
the 4-point scale each month to help agents identify areas
for improvement, develop their skills, and celebrate their
success. This provides a structured and consistent measure
of performance based on quality and quantity of customer
responses, reinforcing THG's meritocratic culture.
Internal mobility
We know that giving our people an opportunity to grow
and develop with us is essential for having a productive,
passionate and efficient workforce. That’s why we’re
committed to promoting internal mobility and providing our
employees with opportunities to move between different
departments and roles. Not only does this benefit our
people as individuals, but it helps to create a more dynamic
and knowledgeable workforce.
One of the ways we support internal mobility is through
our professional development programmes as they give
our people the soft skills and technical knowledge that
they need to take on new roles and responsibilities. We
also have a strong culture of collaboration, evidenced by
the introduction of our new company value, which helps
employees to build relationships and gain exposure to
different areas of the Group.
In addition, we have a clear and transparent promotion
process that gives employees the chance to move up
within their current department or to switch to another
one that aligns better with their career goals. Our People
team works closely with managers to identify potential
opportunities and provide support and guidance to
employees throughout the process.
Ultimately, our focus on internal mobility helps to create
a more engaged and motivated workforce, as well as a
more resilient and adaptable business. By investing in our
employees and supporting their career growth, we can
attract and retain top talent whilst also creating a positive
and supportive work environment.
Watch our THG Accelerator
In Focus video here
75 76
Annual Report 2022
Visibility
& Representation
Recognise and celebrate the success of
our diverse workforce and partnerships,
ensuring every employee feels
represented and heard.
Data
Optimisation
Minority
Representation
Recruitment
& Progression
To hire diversity fairly, sourcing the best
talent regardless of background and
supporting our employees throughout
their journey at THG.
Diverse
Recruitment
Progression
Support
Learning
& Development
Delivering effective and relevant D&I
training tailored to each and every
employee to further their education
or help them progress at THG.
Educational
Training
Accessible
Content
Accessibility
& Inclusion
Providing virtual and physical experiences,
opportunities and work environments
which are accessible to all.
Accessibility
Optimisation
Inclusive
Benefits
In 2022, we launched our Diversity & Inclusion (D&I) strategy, implementing a range of initiatives built around our four
pillars: visibility and representation, learning and development, recruitment and progression and accessibility and inclusion.
To find out more about our progress to date, visit page 72.
2022 Gender
Male Female Not Disclosed Tot al
Board 7 1 0 8
Senior
Leadership
18 6 0 24
Other 3,937 3,979 340 8,256
Tot al 3,962 3,986 340 8,288
2022 Ethnicity
BAME Non BAME Not Disclosed To tal
Board 0 2 6 8
Senior
Leadership
2 11 11 24
Other 941 3,752 3,563 8,256
Tot al 943 3,765 3,580 8,288
Creating a diverse & inclusive workforce
We strongly believe that having a diverse workforce and an inclusive workplace creates a more innovative and successful
business. We’re proud to have a strong gender split across our workforce with 48% of our employees identifying as female
and 48% identifying as male (4% not disclosed), and we are continuing to improve data around the ethnicity
of our workforce. Please see below.
Social impact
Finally, we laid the foundations to deliver our Group Social
Impact strategy in 2023.
Underpinned by three key pillars, championing inclusion,
disrupting inequality and creating opportunity, our strategy
aims to address social issues in our communities and drive
positive change for our people and the things that matter
most to them.
These pillars determine which causes we focus on and
what activities we do both at Group-level and in division.
Health and safety
Nothing is more important than the health and safety
of our people. We continue to make solid progress
strengthening and enhancing our workplace health
and safety arrangements which ensure our people
are safe and well at work. During 2022, we invested in
strengthening our Global Health and Safety support
team to ensure our business operations have access to
best-in-class competent Health, Safety and Environment
(HSE) support and advice to ensure we provide a safe
and healthy place work of work. In addition, our company
health and safety programme delivered:
• Safety leadership refresher training for our Internal
Executive team
• Over 90 THG Managers successfully completed the
Institution of Occupational Safety and Health (IOSH)
Managing Safely training course
• New HSE Management Standards for the control
of contractors
During 2022, we have strengthened our focus on the
prevention of workplace accidents which includes the
robust reporting and investigation of workplace accidents.
Our group-wide Lost time accident frequency rate for 2022
was 0.12
1
. Our plan for 2023, includes continually improving
our processes and procedures for the reporting and
investigation of accidents along with the effective sharing
and learning of accident causes and preventive measures
across the business.
In 2023, our focus will continue to make progress on
ensuring there are common HSE standards in place across
our high-risk activities and strengthen our arrangements for
the control of environmental risk and the mobilisation of our
new Occupational Health Provider.
Health & Safety is a principal risk and the Board has overall
responsibility for risk management. However, as reflected in
its Terms of Reference, the Risk Committee has delegated
responsibility for the monitoring and review of the
processes and procedures in place to manage or mitigate
principal risks, including Health & Safety.
1. Per 100,000 working hours.
1.
Championing
inclusion
We’re committed to championing
digital inclusion & disability
inclusion.
2.
Disrupting
inequality
We’re committed to disrupting
housing inequality and health
inequality.
3.
Creating
opportunities
We’re committed to creating
opportunities through education
and employment.
Our commitments within each pillar will allow us to tackle
complex social issues and create a bigger impact in our
local communities.
In 2023, we will work towards achieving our target of
allowing all THG employees to take 2-days volunteering
leave by 2025 and providing 10,000 people in the
community with technology and life skills training by 2023.
To find out more about our sustainability goals and targets,
visit the Sustainability section.
77 78
Annual Report 2022
Task Force on
Climate-related Financial
Disclosures (TCFD)
Governance
The Company is required to disclose against the
recommendations of TCFD (as required by Listing Rule
(LR) LR 14.3.27R).
As stated in last year’s Annual Report, we have chosen
to adopt a phased approach to achieve full alignment
with TCFD recommendations as THG is progressing on
in its sustainability journey - launching the Group’s first
Sustainability Strategy, THG x Planet Earth, in late 2021.
We set out in the table below our responses to the TCFD
recommendations and recommended disclosures - all
disclosures are considered to be material. Although we are not
yet in position to align and report fully against all of the TCFD
recommended disclosures, we have provided the actions
taken so far and the next steps to enable full disclosure. In
the table below, we have summarised the Group’s ongoing
work programme, set against the core elements of the TCFD
reporting recommendations and guidelines:
Recommendation Response
a) Describe the board’s oversight
of climate-related risks and
opportunities
The Board is scheduled to convene at least eight times a year but additional meetings typically take place to
ensure ongoing business needs are adequately addressed and monitored, including in respect of performance
and delivery of strategic objectives. Environment, social and governance (ESG) matters (including climate
change) arising from the Sustainability Committee are communicated and updated to the Board by the
Chair of the Sustainability Committee in person or virtually using minutes and summarised updates from the
Sustainability Committee meetings. For example our net zero science-based targets were communicated
to and approved by the Board – these targets will undergo validation by SBTi (the global body enabling
businesses to set emissions reduction targets in line with climate science) in 2023. The Sustainability
Committee meets at least three times annually and was established to ensure that the Group has appropriate
and effective strategies, policies and operational controls in place to conduct its business in a responsible and
sustainable manner and to ensure it is properly accountable in respect of sustainability targets. Key duties
include reviewing and monitoring the Group’s systems, strategies, policies and targets in relation to, amongst
other things, energy and carbon management, and climate change. Further details can be found
on pages 141-143.
The Board also has overall responsibility for risk management and establishing the Group’s risk appetite. It
monitors the risk environment and reviews the relevance and appropriateness of the principal risks to the
business. One of the principal risks is Climate Change, Environmental and Social Responsibility. The Risk
Committee supports the Board in setting the Group’s risk appetite and ensuring that processes are in place
to identify, manage and mitigate the Group’s principal and emerging risks. At each meeting, the Committee
reviews the principal risks and their associated appetite targets and metrics, to assess whether they continue
to be relevant, effective and aligned to the achievement of our strategic objectives, and within an acceptable
tolerance for the Group. At least four Risk Committee meetings take place annually. Further details on risk
management can be found on page 83.
b) Describe management’s role
in assessing and managing
climate-related risks and
opportunities
The Group’s Chief Sustainability Officer is accountable for the ongoing development, management and
implementation of THG x Planet Earth. In conjunction with the Board-constituted Sustainability Committee (of
which he is a member), the Chief Sustainability Officer oversees all Sustainability related matters (including
climate-related risks and opportunities) to ensure the Group has appropriate and effective strategies, policies
and operational controls in place to conduct its business in a responsible manner.
In 2022, the TCFD governance structure and process was established. This includes a cross functional
Working Group focusing on alignment with TCFD recommendations which meets at least fortnightly.
The Working Group feeds into the TCFD Steering Committee, consisting of senior representatives from
Sustainability, Finance, Procurement and Risk, which meets at least six times a year. The Steering Committee
ensures the Working Group’s progress on TCFD alignment and manages the overall direction of the
workstreams associated with TCFD. Outcomes from the TCFD Steering Committee are communicated to the
Sustainability Committee.
Focus and actions for 2023 and beyond
We will communicate progress and outputs towards full TCFD alignment to the Board – including:
1) Outcome of climate-related risks and opportunities assessment.
2) Climate scenario modelling and analysis.
3) Progress against climate-related targets.
Disclosure level:
Key
Full
Partial Omitted
TCFD
Working
Group
TCFD
Steering
Committee
Sustainability
Committee
Board
80
79
Annual Report 2022
Recommendation Response
a) Describe the climate-related
risks and opportunities the
organisation has identified
over the short, medium, and
long-term
b) Describe the impact of climate-
related risks and opportunities
on the organisation’s businesses,
strategy, and financial planning
c) Describe the resilience of the
organisation’s strategy, taking
into consideration different
climate-related scenarios,
including a 2°C or lower
scenario
To achieve full implementation of the reporting recommendations of the TCFD over the course of the next few years,
one of the first steps we took in 2022 was the formation of the TCFD governance structure and process – details can be
found in the TCFD Governance Section. This allowed us to focus and pull together resources to conduct a ‘gap analysis’
to full TCFD alignment and create an action plan (summarised below in ‘Focus for 2023 and beyond’).
In 2021, as part of the Group’s work to develop the THG x Planet Earth Strategy, high level material ESG issues including
climate and GHG emissions were identified – details of our last materiality assessment can be found in our 2021 Annual
Report, pages 89-90. This year, we reviewed those issues alongside the ESG risks and opportunities and extracted the
climate-related risks and opportunities. Examples of the types of climate-related risks and opportunities that are now
being considered, and which will be further reviewed, defined and input into future climate scenario modelling and
analysis in 2023 are summarised below:
Transition risks
• Policy and legal – Changes in climate-related regulations may affect carbon price,
carbon offset/credits and carbon tax.
• Markets – Increase in carbon prices may impact cost of energy and other resources/materials.
Physical risks
• Chronic/Acute – Acute and chronic weather events (e.g floods and storms) may disrupt supply chains and
operations, impacting prices of agricultural raw materials and commodities.
Opportunities
• Products and services – Increase in demand for more sustainable product alternatives
and services such as THG Eco.
• Markets – Investment thesis for low carbon transition grows as governments
and investors commit to a greener economy.
To understand the impacts of climate-related risks and opportunities as identified above, we must conduct climate-
related scenario modelling (using short, medium and long-term time periods which will be determined as part of the
overall climate scenario modelling project in 2023). Given the expertise and software required to undertake such an
exercise we must partner with external experts and therefore have not been able to undertake it this year but will plan
to do so for 2023 (as detailed in the section below). As our TCFD work progresses, we will consider the extent to which
these climate-related risks and opportunities are already taken into account within THG’s business strategy and financial
planning and how they may help to inform future decision making.
Focus and actions for 2023 and beyond
Further work on climate risks and opportunities, impacts and scenario analysis will be undertaken over the next few
years. Our progress and timeline is summarised below:
Phase 1 (2022) - Complete
• TCFD Gap analysis – Identifying gaps in current processes, structure and programmes against TCFD
recommendations.
• TCFD Action Plan – Identify the actions and resources required to achieve full alignment with TCFD
recommendations.
• Climate-related risk and opportunities identification – Review and extract the climate-related risks and
opportunities from previous ESG materiality assessment.
Phase 2 (2023)
• Climate risk and opportunities refinement and assessment – Refine, score/prioritise and input the climate-
related risks and opportunities.
• Climate-related risk and opportunities modelling and impact analysis – Quantify the possible impacts of climate-
related risks and opportunities across three time horizons using at least two different climate-related scenarios.
• Net zero roadmaps to be created for our Beauty and Nutrition divisions.
Phase 3 (2024+)
• Climate risk and opportunities integration – Utilising and embedding the outputs of climate related risks and
opportunities into the wider business and divisions – including business strategy, financial planning and risk
management.
• Working towards our GHG emissions reduction targets (which are awaiting SBTi validation in 2023)
using the net zero roadmaps for divisions.
Recommendation Response
a) Describe the organisation’s
processes for identifying and
assessing climate-related risks
Climate-related risk is embedded in Climate Change, Environmental and Social Responsibility risk which is one of the
Group’s principal risks (see further detail on page 91). The Risk committee supports the Board in setting the Group’s risk
appetite and ensuring that processes are in place to identify, manage and mitigate the Group’s principal and emerging
risks. Current and emerging regulatory risks (such as TCFD and Extended Producer Responsibility (EPR)) are taken into
consideration when determining principal risks. At each meeting, the Committee reviews the principal risks and their
associated appetite, targets and metrics, to assess whether they continue to be relevant, effective and aligned to the
achievement of our strategic objectives, and within an acceptable tolerance for the Group.
b) Describe the organisation’s
processes for managing
climate-related risks
The Sustainability team and others across the business including Legal and Property undertake a monthly review
of the Climate Change, Environmental and Social Responsibility risks. This process involves the identification and
assessment of various Climate Change, Environmental and Social Responsibility risks. Also, during the monthly reviews,
mitigation actions and workstreams for climate risks are monitored and high risk items are flagged to be raised in the
Risk Committee. The impacts (financial and non-financial) and likelihood of identified risks are scored on our Group Risk
scoring matrix which incorporates environmental and social impacts. Further information can be found in the
Risk Management section (pages 87-95).
In 2021, a high level ESG materiality assessment was undertaken (including climate change related risks identification
and prioritisation). The assessment took into account the likelihood and impact of such risks. Examples of the climate-
related risks and opportunities are summarised in the Strategy section above. We aim to expand and go into further
detail of the identified climate-related risks during 2023 as part of our climate scenario modelling workstream. As THG’s
climate-related risks and opportunities are reviewed and assessed further, we will enhance and refine the non-financial
(including climate) elements of the Group risk assessment process including the risk matrix.
c) Describe how processes for
identifying, assessing, and
managing climate-related risks are
integrated into the organisation’s
overall risk management
As part of monthly risk updates as described in the above section, the output feeds into the Group risk monthly update
meetings between the Chief Risk Officer and accountable risk leads from across the business. High risk items are
escalated to the Risk Committee (which meets quarterly) for comment and scrutiny (further detail can be found in the
Governance section, page 80).
Focus and actions for 2023 and beyond
The Group will be determining the short/medium/long-term time horizons for climate-related risks and opportunities,
with intent to align with existing THG frameworks so the significance of the climate risks and opportunities can be
determined in relation to other risks. This work will be undertaken as part of the climate scenario modelling exercise in
2023.
We will also look at updating the non-financial descriptors in the risk matrix after climate scenario modelling has been
undertaken to reflect factors and thresholds to be considered when assessing the severity of a risk (from a non-financial
impact perspective).
Recommendation Response
a) Disclose the metrics used by
the organisation to assess climate
related risks and opportunities
in line with its strategy and risk
management process
In 2022, we developed our Science-based targets, which includes reduction targets for Scope 1, 2 and 3 emissions. The
targets were submitted to SBTi (Science Based Targets initiative) for validation in 2022 and are expected to be approved
and published in 2023.
GHG emissions (including intensity ratios) and energy metrics are currently calculated and disclosed in compliance with
SECR (Streamlined Energy and Carbon Reporting) – please see page 63 and our Basis of Reporting – GHG emissions
document. These are used to inform our THG x Planet Earth Strategy and various processes such as CAPEX planning.
Other climate-related metrics (e.g water and waste) will be determined and used more widely as we undertake climate
scenario modelling in 2023 and further align with TCFD recommendations.
b) Disclose Scope 1, Scope 2,
and, if appropriate, Scope 3
greenhouse gas (GHG)
emissions, and the related risks
THG calculates and discloses Scope 1 and 2 emissions (market and location-based), further information can be found on
page 63. In 2022, we also calculated our Scope 3 baseline emissions for 2020, details can be found on page 61. We will
continue to develop our approach to Scope 3 calculations in 2023 as part of our THG x Planet Earth Strategy and targets.
c) Describe the targets used
by the organisation to manage
climate related risks and
opportunities and performance
against targets
In late 2021, we launched THG x Planet Earth where we published our goal to be carbon positive by 2030. To achieve
this we have submitted Scope 1, 2 and 3 emissions reduction targets to SBTi for validation and will be published in
2023. In 2022, ESG metrics (including setting SBTi targets) were linked to executive remuneration, further details can be
found on page 147. In future years, specific emissions reduction targets will also be embedded into the ESG component
of executive remuneration after our science-based targets have been validated. We are also currently in the process of
developing an implementation plan for our divisions to achieve these targets. The methodology used to calculate our
Scope 1, Scope 2 emissions and energy use metrics can be found in our Basis of Reporting – GHG emissions document.
Focus and actions for 2023 and beyond
In 2022, we prioritised establishing the reporting processes and framework for capturing energy and emissions data.
We also undertook limited assurance on our Scope 1 and 2 emissions and associated energy use – details can be found
on page 63. In 2023, we will be expanding to other climate-related metrics such as water and waste as detailed in THG
x Planet Earth.
Furthermore, over the next few years we will be developing more specific intensity and efficiency ratios which
is part of the plan to reduce our emissions as per our SBTi targets and climate goals.
Strategy
Risk management
Metrics and targets
Disclosure level:
Key
Full
Partial Omitted
81 82
Annual Report 2022
THG’s Enterprise Risk Management (ERM) Framework
is designed to protect the interests of key stakeholders
and enhance the quality of decision making, enabling
the effective management of our strategic, operational,
commercial, compliance, change and emerging risks.
We continuously seek to embed and improve the use
and adoption of the THG ERM Framework, to ensure it is
integral to our day-to-day activities. This helps us to deliver
Risk management
and informed
decision making
Risk appetite and risk tolerances
Our risk appetite reflects our ability and desire to accept
a certain level of risk to achieve our strategy. We recognise
that eliminating risk is often not feasible or desirable, so
we use our group risk appetite statement, parameters and
metrics to support informed decisions on the level of risk
that can be taken or sought to achieve strategic objectives.
All identified risks are measured using the pre-determined
risk matrix set out in our Risk Management Policy.
Principal risks are monitored against risk appetite targets
using supporting measures, metrics, and tolerances,
which are evaluated throughout the year to ensure
they remain aligned with our strategic objectives,
and within an acceptable risk tolerance for the Group.
How we assess risks
All identified risks are assessed for likelihood and impact
using a range of financial and non-financial criteria aligned
to the business and its respective divisions. The assessment
considers risk before any mitigations (inherent risk) and
after current mitigations (residual risk). The key benefit of
assessing inherent risk is to highlight potential risk exposure
in the event of control or mitigation failure.
How we manage risks
Eliminating risk is often not feasible or desirable, so we use
risk appetite to make informed decisions on the appropriate
level of risk that can be taken to support achievement of our
strategic objectives. Our overall risk appetite is approved
and measured by the Board.
All our principal risks are assigned to Executive Owners.
The Executive Owner is responsible for the overall
management of the risk, ensuring the adequacy of control
and the robustness of action plans to maintain the risk
within appetite. Principal and emerging risks are supported,
as appropriate, by in-depth reviews.
Business risks are identified and captured divisionally
and functionally, being owned and managed within their
respective management teams and reviewed on an
ongoing basis.
Risk reporting and monitoring
We continue to consider risks both individually and collectively
to fully understand our risk landscape. By analysing the
correlation between risks, we can identify those that have the
potential to cause, impact, or increase another risk and that
these are weighted appropriately. This exercise informs our
scenario analysis, particularly in scenarios used in the Viability
Statement, see pages 93-95.
Business risks are consolidated and escalated in accordance
with our Risk Management Policy and via the ERM Framework
to the Risk Committee. This provides organisational visibility
to emerging, strategic, commercial, operational, financial and
compliance risks. The risks are considered in context of our
existing principal risks and to drive accountability and action.
Principal risks are managed, mitigated and monitored against
risk appetite in line with our Risk Management Policy and
evaluated throughout the year to ensure they remain aligned
to our strategic objectives. They are continually reviewed by
our Risk Committee, who also consider the results of ‘in-depth’
testing of key controls supporting each principal risk.
Risk governance
THG operate a formal risk governance structure ensuring
risk management is at the forefront of decision making
and creating clear points of escalation.
Board
The Board has overall responsibility for risk management
and establishing the Group’s risk appetite. It monitors
the risk environment and reviews the relevance and
appropriateness of the principal risks to the business.
Risk Committee
The Risk Committee supports the Board in setting the
Group’s risk appetite and ensuring that processes are in
place to identify, manage and mitigate the Group’s principal
risks. At each meeting, the Committee reviews the principal
risks and their associated appetite targets and metrics,
to assess whether they continue to be relevant, effective
and aligned to the achievement of our strategic objectives,
and within an acceptable tolerance for the Group.
Further information on the Committee’s activity in 2022 is
set out in the Risk Committee Report on pages 130-132.
Audit Committee
The Audit Committee monitors the effectiveness of the
control environment through the review of Internal Audit
reports and other assurance activity from THG Internal
Audit and consideration of relevant reporting from
management and the external auditor.
Further information on the Committee’s activity in 2022
is set out in the Audit Committee Report on pages 123-129.
Executive
The Executive is responsible for the stewardship of the
risk management approach. It develops the strategy and
oversees the delivery of the related operational plans that
help to manage the associated risks. Each principal risk
is also owned by a member of the Executive.
our strategic objectives and goals through risk-informed
decision making and the effective management of risk.
In 2022 we continued the maturing of our approach to risk
management, including a further refresh of our principal
risks, the embedding of divisional risk management
processes and the alignment of insurance within our risk
function, including the creation of THG Insurance Limited.
Assess /
Analyse
Monitor /
Track
Identify /
Understand
Respond /
Measure
Report /
Communicate
Figure 1 – ERM Framework
How we identify risks
Our risk identification process follows an enterprise wide
“top-down, bottom-up” approach, which seeks to identify:
• principal risks that may impact our ability to and pace
by which we achieve our strategic objectives, with these
risks representing the risks that most threaten delivery
of our strategy; and
• strategic, commercial, operational, compliance and
change risks (“business risks”) that occur at a divisional
level. These risks are those that pose the greatest threat
to the success of business activities across the Group
and may also feed into our principal risks.
83 84
Annual Report 2022
Chief Risk Officer
The Chief Risk Officer (CRO) is responsible for the
second and third-line functions, namely THG Risk and
THG Internal Audit. The CRO is responsible for the
facilitation and implementation of the risk management
approach across THG, including the provision of
appropriate risk reporting for the Risk Committee, Audit
Committee and the Executive. The CRO attends the Risk
and Audit committee meetings and regularly meets with
respective Chairs outside these meetings. The CRO is also
responsible for insurance, business continuity, health and
safety, food safety, facilities, security and loss prevention.
THG Risk
THG Risk supports the effective operation of the ERM
Framework and Governance Structure, including the
management of the principal risks and providing guidance,
support and challenge to the business to effectively
manage risk.
THG Internal Audit
THG Internal Audit is led by the Head of Internal Audit, and
its purpose and activities are set out in the Internal Audit
section of the Audit Committee Report on page 127.
1st Line
3rd Line
2nd Line
All Employees
Own & operate
THG Risk
Guide, support and challenge
THG Internal Audit
Independent Assurance
Our three lines governance model defines clear roles
and responsibilities for all employees and establishes
accountability for actions and decisions. It also describes
how appropriate oversight, challenge and assurance are
provided over business activities, including the ethical
conduct of our operations.
The First Line represents all employees, giving them
responsibility for management of their risks and the
subsequent deployment of risk strategies, thus supporting
risk-based decision making. They hold the necessary
skills and knowledge to help with the identification and
management of risks within our business.
The Second Line consists of THG Risk, who are responsible
for setting the framework, policies, tools and techniques
to enable the First Line to effectively manage risk. As part
of this role, THG Risk are on hand to provide support and
guidance to ensure a consistent approach to managing
risk is maintained. THG Risk also manages the corporate
insurance programme, ensuring that placements are
appropriate for the risk exposure and in line with our risk
appetite. The Board recognises that culture underpins the
effectiveness of THG’s risk management, and the operation
of an effective control environment.
The Third Line is THG Internal Audit, the main role
of which is to assess whether the first two lines are
operating effectively.
Risk management
and internal controls
The Board retains overall responsibility for setting group
risk appetite and for risk management and internal control
systems. In accordance with principles M, N and O of the
UK Corporate Governance Code 2018 (the “Code”), in
addition to Paragraph 58 of the FRC guidance (Section 6),
the Board is responsible for reviewing the effectiveness of
the risk management and internal control systems
and confirms that:
• There is an ongoing process for identifying, evaluating
and managing the emerging risks faced by the
Company;
• The systems have developed throughout the year under
review and up to the date of approval of the Annual
Report and Accounts;
• They are regularly reviewed by the Board; and
• The systems accord with the FRC guidance on risk
management, internal control and related financial
and business reporting.
There were no instances of significant control failing
or weakness during the year.
You can read more about our risk management and internal
control systems in our Strategic Report on pages 83-95
and the associated work of the Audit and Risk Committees
on pages 123-132.
A changing risk landscape
The current macroeconomic and geopolitical environment
has created a more challenging risk landscape for all
organisations. Our ERM Framework equips us to monitor,
understand and respond to external uncertainties and
events. The external risk landscape is reviewed regularly
to ensure we proactively respond to external events
with potentially material impacts.
The war in Ukraine heightened uncertainty for our
employees, customers and investors. In response, we
rapidly evaluated the risks, determined potential impacts
to our business and made changes to our business
operations and supporting processes. We also used
our existing cyber security capability to strengthen our
resilience against potential cyber threats. Through our
risk governance channels we continue to monitor the
possible wider effects of the conflict.
We also considered our wider approach to resilience
and business continuity planning, with a focus on
preparedness for energy supply issues, and any potential
impact on employees, business operations and customers.
Whilst the Covid-19 pandemic has stabilised, we continue
to monitor its long-term effects through the principal risk
process, together with the impact of the war in Ukraine,
energy supply issues and rising interest rates and their
combined impact on increasing the potential risk of
recession in key markets. Throughout 2022, the global
pandemic continued to produce challenging conditions
across many sectors of the global economy. THG’s priority
has been, and remains, to protect the health, safety and
wellbeing of our employees.
Figure 2 - Three Lines
Governance Model
Emerging risks
We define emerging risks as uncertainties arising from
trends that are on our radar, but whose full extent and
associated implications are not yet completely clear.
These types of risk continue to be identified through both
the Principal and Operational Risk processes. Additionally,
emerging risks are identified, prioritised and understood
via an ‘identify, filter and prioritise, and investigate and
understand’ approach. This approach utilises internal and
external sources, including business leaders and subject
matter experts, across a selection of categories to identify
potential emerging risks and opportunities.
By the very nature of emerging risks, it is common to
identify false leads, conflicting signals and messages.
Therefore, the approach filters and prioritises, to support
management in helping to decide which emerging risks
should be investigated further.
Once it has been decided which emerging risks should be
explored further, they are investigated and understood by
an allocated Emerging Risk Owner, working with THG Risk.
The work to understand emerging risks will vary depending
on the risk, but ranges from basic qualitative assessment
to modelling and quantitative assessment.
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Annual Report 2022
Principal risks
The Board and the Risk Committee carry out a robust and
ongoing assessment of the principal and emerging risks
facing the Group throughout the year. The assessment
considers those risks that would threaten THG’s business
model, future performance, solvency or liquidity, and
ensures that the risks continue to align with our business
strategy. The effective management of strategic, financial,
compliance and operational risks is critical to the success of
THG’s strategy. THG continually assesses its principal risks
to ensure continued and enhanced alignment.
In reviewing the principal risks, we have split ‘Regulatory
Compliance’ into ‘Health and Safety’, ‘Product Quality and
Safety’ and ‘Legal and Regulatory Compliance’ to better
reflect the complexities of our regulatory landscape and
the key risks that may impact our strategy. In addition,
our ‘Infrastructure’ and ‘Onboarding and Integration’ risks
have been merged to reflect the focus on exploiting our
significant investment over the past two years, alongside
additional focus on supply chain to become ‘Infrastructure
and Supply Chain’. Our ‘Environment, Social and
Governance’ risk has been refocussed as ‘Climate Change,
Environmental and Social Responsibility’, better reflecting
our continued commitment to the wider community and
the progression of our Sustainability Strategy.
The continued maturing of our risk management approach
has seen the removal of ‘Corporate Structure’ given the
successful restructuring of the business during 2022 and
the addition of 3 new principal risks: ‘Geopolitical and
Economic Uncertainty’ reflecting the current changing
risk climate; ‘Liquidity and Funding’, to reflect external
stakeholder focus on e-commerce funding and liquidity;
and ‘Strategic Optionality’, reflecting the importance of
making optimal strategic decisions to continually transform
our portfolio of businesses.
We manage principal risk in line with our risk management
policy and approach, as set out in risk management on
pages 83-86. In 2022, we monitored and reported on 15
principal risks. As detailed in the following table, a range of
measures are in place, or are being deployed or developed,
to manage and mitigate our principal risks.
Risk heat map
Likelihood / Frequency over 36 months
Financial / Non-Financial Impact
Principal Risk Risk context Management and mitigation
Cyber Security
and Data Privacy
Failure to responsibly collect,
process and store data, together
with not ensuring an appropriate
standard of cyber security across
the business, will result in us not
meeting our regulatory obligations,
and losing the trust of our
stakeholders.
Link to strategic priority
Executive Owner(s):
Chief Technology Officer,
General Counsel
Direction of Travel -
Information is the life blood of
a digital company – protecting
the confidentiality, integrity and
accessibility of this data is critical
for a data-driven business. Failure to
do so can have significant financial
and regulatory consequences in the
General Data Protection Regulation
(GDPR) era. In addition, we also
need to use our data efficiently
and effectively to drive improved
business performance.
• The Chief Information Security Officer oversees information
security. The Global Privacy Officer oversees information
protection.
• Multi-year cyber security programmes driving continuous
improvement and cyber risk reduction across technology,
business processes and culture.
• Continuously improving data protection strategy, framework
and methodology, ongoing data mapping and impact
assessment procedures.
• Formally-deployed information security risk management
methodology to provide objective reviews and monitoring
of our assets and systems.
• All colleagues are required to undertake awareness training
for information management and data protection, with a focus
on the GDPR requirements.
• Internal and external validation of compliance through auditing,
including risk-based audits of suppliers and other third parties
(see ‘Third-Party Reliance’).
Third-Party Reliance
Failure to embed our partners as
an integral and aligned part of our
infrastructure, fulfilment and go-to-
market strategy in a timely manner,
will result in us failing to deliver the
right capabilities and experiences
to our customers.
Link to strategic priority
Executive Owner(s):
Group Procurement Director
Direction of Travel -
THG places reliance on third-party
providers to support the delivery
of our services to our customers.
Any interruption in these services
or relationships could have
a profound impact on THG’s
reputation in the market and
could result in significant financial
liabilities and losses.
• All new suppliers go through a rigorous selection and
onboarding process.
• Procurement team monitors supplier performance on an
ongoing basis, against third-party contract service-level
agreements.
• Dual sourcing for most supply categories and in all business
units, reducing dependencies on sole suppliers.
• Ongoing development of global site standards and monitoring
to ensure adequate standards are maintained in the supply
chain as far as possible, applicable both in-house and with
third-party sites.
• Assurance on our key third-party suppliers and service
providers through Internal and external compliance auditing.
• Business Continuity strategies include an assessment of
potential third-party impacts.
• Increasing our supply chain capacity by building new additional
fulfilment centres globally, with less reliance on third-party
warehouses (see ‘Infrastructure and Supply Chain’).
Build category leadership
positions in beauty, health
and wellness.
Accelerate growth in core
international territories,
leveraging our local
infrastructure.
To make Ingenuity the
partner of choice for
commerce transformation
and sustainability solutions.
Drive positive change with
our stakeholders, through
an entrepreneurial,
values-led culture.
Deliver engaging content
and innovative products to
our global customer base.
Key
Group strategic priorities
Direction of travel
Increasing Decreasing Stable New Risk
3
6
11
1213
14
15
5
2
8
7
9
1
10
4
Key
1. Cyber Security & Data Privacy
2. Third Party Reliance
3. Talent
4. Ingenuity e-commerce Platform
5. Customer Needs
6. Infrastructure and Supply Chain
7. Innovation
8. Legal and Regulatory Compliance
9. Product Quality and Safety
10. Health and Safety
11. Climate Change, Environmental
and Social Responsibility
12. Geopolitical and Economic Uncertainty
13. Culture
14. Liquidity and Funding
15. Strategic optionality
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Annual Report 2022
Principal Risk Risk context Management and mitigation
Infrastructure and
Supply Chain
If we fail to scale our infrastructure,
systems and wider supply chain
at pace, whilst maintaining service
levels, it will impact our ability to
meet demand, attract customers
and support territorial expansion.
Link to strategic priority
Executive Owner(s):
Chief Operating Officer
Direction of Travel -
World-class infrastructure and
supply chain from source to
customer is fundamental to the
exacting service levels that we
seek to provide to businesses and
customers alike. Our infrastructure
must be robust, slick and secure
and ensure the THG service
offering is second to none. The risk
is compounded by demands for
incremental functionality and the
need to deploy this across a larger
footprint.
• Operational Excellence team delivering strategic programmes
to ensure all aspects of the THG estate achieve operational
excellence, seamless integration, conform to a unified standard
and evolve to support the business as it scales and changes.
• Capex Committee oversees THG’s Capital Projects team to
support and monitor transformation programmes, including
management of programme risks and dependencies.
• THG Risk are involved in these steering groups to ensure
the cross-functional execution of infrastructure projects are
successful and reduce the risk that projects do not deliver their
desired outcomes on time or fail to maximise the expected
benefits.
• Comprehensive disaster recovery and business continuity plans
in place across the Group.
• Continuous monitoring of supply chain activity and news
through advanced web-scraping functionality.
• Continuous monitoring and forecasting of demand and
availability to adjust intake accordingly.
• Multiple delivery methods, routes, ports and carrier strategies to
minimise the risk of disruptions.
• Extensive and up-to-date knowledge of supplier base to ensure
we can scale our supply chain appropriately and at pace.
Innovation
If we fail to identify and leverage
emerging technologies and
invest in modern practices and
supporting tools, methods and
infrastructure in a timely manner,
we will not meet the needs of
our customers or our commercial
goals.
Link to strategic priority
Executive Owner(s):
Chief Operating Officer
Direction of Travel -
We must be able to rapidly
deploy new innovations to
our infrastructure, systems
and customers by introducing
technologies, services, or new
ways of working. Innovation
requires us to address how we
drive change and transformation
across our employees, processes
and technology, and how we
differentiate and drive excellence
and efficiencies.
• Strategic investments, alliances and partnerships
in our fulfilment infrastructure, such as the Autostore.
• A fully vertically integrated business model, with full control over
new product development, branding and design capabilities,
which significantly reduces development timelines.
• Collaboration with partners to complement and enable
accelerated innovation.
• Innovation informed through demand insights, consumer data
and feedback from our global retail customer base.
Legal and Regulatory
Compliance
Failure to anticipate, understand
and implement our legal and
regulatory requirements, will
result in us failing to meet our
obligations, impacting our ability to
deliver our strategy and losing the
trust of our stakeholders.
Link to strategic priority
Executive Owner(s):
General Counsel
Direction of Travel -
We continue to operate in a global
market with numerous legal and
regulatory requirements. Remaining
aware of changing regulation and
ensuring compliance is key to
ensuring we protect both THG
and our customers and partners.
• Compliance teams with reporting lines into Chief Risk Officer
and Deputy General Counsel.
• Defined Risk Appetite metrics and Key Risk Indicators
which are monitored and updated at each Risk Committee.
• Emerging risk processes, including horizon scanning,
to anticipate potential changes in the legal and regulatory
landscape.
• Legal and regulatory compliance reviews are an embedded
part of the annual assurance plans delivered by our 3rd line
of defence.
• See “Cyber Security and Data Privacy” for related regulatory
compliance mitigations.
Principal Risk Risk context Management and mitigation
Talent
If we fail to attract at pace, and/or
retain employees with the critical
skills, capabilities, motivation and
capacity we need to deliver on our
strategy, we will not be successful.
Link to strategic priority
Executive Owner(s):
Chief People Officer
Direction of Travel -
As we continue to evolve our
priorities, the capacity, knowledge
and leadership skills we need will
continue to change. THG will not
only need to attract the talent
and experience required to help
navigate this change. We will also
need to provide an environment
where employees can develop
to meet these new expectations;
an environment where everyone
can perform at their very best. By
continuing to empower employees
and leaders to make decisions, be
innovative, and be bold in delivering
on our commitments, THG will
continue to create an attractive
working environment, increasing
employee engagement and aligned
high-performing teams.
• Reviews of our remuneration requirements and mechanisms
designed to incentivise and drive the right behaviour with a
focus on ensuring fair and equitable pay across the business.
• Focused development of key staff, through dedicated learning
and development tools, to ensure they create the environment
which enables colleagues to thrive and perform at their very
best.
• The above, monitored via engagement surveys, follow-ups
and our performance management processes.
Ingenuity e-commerce
platform
Failure to maintain a reliable,
scalable and secure live services
environment, will impact our
ability to deliver the consistent and
resilient experience expected by
our customers.
Link to strategic priority
Executive Owner(s):
Chief Technology Officer,
Chief Executive Officer - Ingenuity
Direction of Travel -
As a digital company, we continue
to focus on scaling our current and
future Ingenuity platform services
environment in an agile and speedy
manner to ensure the delivery
of a consistent and robust cloud
platform and associated digital
network. THG must provide the
right infrastructure and operations
for all our customer products, a
hosting platform, together with
the governance to ensure optimal
service availability, performance,
security protection and restoration
(if required).
• Ongoing investment in our Ingenuity platform services
to ensure the THG estate evolves to support the business
as it scales and changes.
• Continuous enhancement of our data protection strategy,
framework and methodology, ongoing data mapping and
impact assessment procedures.
• Robust change management processes and incident
management protocols adhered to for all products and services.
• Service-level objectives including uptime, responsiveness,
and mean time to repair objectives.
• Comprehensive disaster recovery and business continuity
plans in place across the Group.
• Other key mitigation factors detailed under “Cyber Security
and Data Privacy” risk.
Customer Needs
If we fail to anticipate, understand
and deliver against the capabilities
and experiences our current and
future customers need in a timely
manner, they will find alternative
providers.
Link to strategic priority
Executive Owner(s):
Chief Marketing Officer,
Chief Experience Officer
Direction of Travel -
As THG continues to grow
its business and brand,
an understanding of how
to continually attract customers
whilst retaining our existing
customers is essential. This requires
a deep and continuous flow of
insights supported by processes
and systems. By understanding the
needs of our customers, THG will
continue to differentiate itself from
competitors, build compelling value
propositions and offers, leverage
key drivers to identify opportunities,
decrease churn and drive more
effective revenue generation.
• Utilisation of customer activity and churn data, to understand
their appetite for product offerings.
• Continuous Net Promoter Score (NPS) surveying allows THG
to identify customer challenges rapidly, and respond in a timely
manner to emerging trends.
• Developments in e-commerce trends are monitored to keep
abreast of the latest developments and innovations.
• Use of technology and data to be more targeted and strategic
in how we gain new customers and maximise the loyalty and
lifetime value of existing customers.
• Managed International Customer Service - 24/7 Customer
Service for a global audience across live chat, calls, email
and social.
• Highly-competent buyers and merchandisers are adept
at interpreting and acquiring desirable brands.
• Customer service levels and complaints are monitored,
and internet sites are reviewed for customer opinion.
• Investment in logistics, fulfilment, delivery, marketing, brand
and customer experience to keep our customer appeal.
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Annual Report 2022
Principal Risk Risk context Management and mitigation
Product Safety
and Quality
Failure to manufacture and
provide safe, compliant and
quality products to our consumers,
may prevent them making
informed purchasing decisions,
compromise their safety and
result in us failing to meet our
obligations, negatively impacting
our brand and reputation.
Link to strategic priority
Executive Owner(s):
Chief Operating Officer
Direction of Travel -
Ensuring the ongoing quality and
safety of our product portfolio
is vital for our brands and our
reputation.
The quality and safety of the
products within our portfolio are
at risk of becoming compromised
at any stage in the supply chain if
we fail to adequately monitor the
associated processes.
• Product safety and quality is embedded in our processes
and controls, from product design to customer.
• Rigorous testing and regularly monitoring performance
indicators that drive improvement activities.
• External certification and auditing of key suppliers.
• Regular monitoring and quality controls over material received
to ensure that THG product safety and quality standards
are met.
• Activation of incident management teams in the event of an
incident relating to the safety of our consumers or the quality
of our products
.
• Oversight from our extensive team of product quality, regulatory
compliance and technical experts across each of the markets in
which we operate.
Health and Safety
Failure to implement and
monitor appropriate policies
and procedures and support
a continually improving safety
culture across all parts of the
business could lead to accidents
or incidents resulting in loss
of life or serious injury.
Link to strategic priority
Executive Owner(s):
Chief Operating Officer
Direction of Travel -
Health and safety is of paramount
importance and THG must
provide a safe environment
for all stakeholders.
Failure to implement and monitor
stringent health and safety
procedures and policies across all
parts of the business could lead to
accidents or site-related incidents
resulting in loss of life or serious
injury to employees, subcontractors,
visitors, customers or members
of the public.
Our global footprint and evolving
infrastructure further compound
this risk.
• Clear, effective and regular communications of all relevant
safety updates.
• Regular and documented training.
• Ongoing updates to our risk assessments and safe systems
of work by trained and competent staff to raise awareness and
knowledge.
• Experienced and competent health and safety professionals
to guide, challenge and support.
• Ongoing monitoring of culture and regular reviews of
compliance against relevant safety regulations, policies
and procedures.
• Oversight by the Board and regular review of safety reports
and safety performance.
Climate Change,
Environmental
and Social
Responsibility
Failure to achieve our sustainability
related aims, objectives and
obligations, will impact our ability
to deliver our Sustainability
Strategy and result in us failing to
meet our regulatory obligations
and public commitments, losing
the trust of our stakeholders.
Link to strategic priority
Executive Owner(s):
Group Commercial Director
Direction of Travel -
We are committed to investing in
our people, partners, technology
and communities to give individuals,
businesses, and our planet the
opportunity to thrive. Our vision is
to act as a force for good in leaving
the world a better place than we
found it.
If we do not act on climate change,
associated governmental actions
and energy transition could disrupt
our operations and increase our
costs.
• Sustainability is integral to the group ethos with a team, headed
at an Executive level, to focus on creating more sustainable
products and supply-chain operations and reduce environmental
impact.
• Multiple workstreams designed to respond to specific risks
and opportunities as part of our Sustainability Strategy.
• Sustainability data and reporting platform which allow us to
comply with regulations and measure performance against
targets.
• Governance structures, such as the internal TCFD (Task Force
on Climate-Related Financial Disclosures) Steering Committee
and working group, ensure there is adequate and regular
oversight, with additional independent oversight via
the Sustainability Committee.
• A series of sustainability training modules are being rolled
out to all employees. In addition, all new starters undertake
sustainability inductions as part of their onboarding.
• Oversight from our team of sustainability experts.
• External third-party assurance of our operational energy
and emissions data.
Principal Risk Risk context Management and mitigation
Geopolitical and
Economic Uncertainty
Failure to anticipate, understand
and successfully respond to changes
in geopolitical and economic
uncertainly on a timely basis, may
impact our ability to meet our strategy.
Link to strategic priority
Executive Owner(s):
Chief Financial Officer
Direction of Travel -
Adverse changes to economic
conditions could affect one or more
countries and result in reduced
customer spending, higher interest
rates, adverse inflation in our cost
base, adverse FX movements and
limited debt refinancing options.
All the above could negatively
impact our operating cashflows.
• Diverse product portfolio and geographic reach which mitigates
our exposure to any localised risks and uncertainties.
• Adaptable portfolio of existing products and an ability to develop
new products that suit consumers’ and customers’ changing
needs when economic conditions change.
• An ability to respond to the inflationary pressures on both inputs
and product pricing.
• Currency and interest rate hedging arrangements in line with
the Group’s Treasury Policy.
• Regular reforecasting of business results and cash flows,
and rebalancing of investment priorities where necessary.
• Financial resilience and liquidity with significant cash on hand
at year-end and our undrawn revolving credit facilities.
Culture
If we do not fully empower our
employees and enable accountability
in line with our shared values and
behaviours, we will be challenged
to create a culture that meets THG’s
business ambitions.
Link to strategic priority
Executive Owner(s):
Chief People Officer
Direction of Travel -
The development of a shared
behavioural competency that
encourages employees to always
do the right thing, put customers
at the heart of the business and
drive innovation, is critical in THG’s
success. Devolution of decision
making, and the acceptance of
accountability for decisions, is
fundamental to our continued
development and to sustain
our shared Values and Behaviours.
THG also supports a culture of
empowered leaders that develops
ideas and solutions, and provides
employees with a safe environment
allowing for honest disclosures and
discussions. Such a trusting and
empowering environment can help
sustain innovation, enhance customer
success and drive the engagement
that results in increased market share.
• Integration of Values and Behaviours into all our core colleague
priorities including objectives, performance management,
appraisals, talent attraction, selection and development,
leadership development and onboarding.
• Establishment of a Diversity & Inclusion (D&I) Committee,
a platform to further improve the employee journey and
workplace culture to ensure we are a truly inclusive workplace.
• Training including anti-bribery and corruption training which
continues to be delivered across our business units based on
assessed risk.
• Whistleblowing and incident reporting mechanisms in place to
allow issues to be formally reported, investigated and monitored.
• Employee engagement surveys & follow ups.
• KPIs and People Dashboards at a divisional level, including D&I
metrics and attrition analysis.
Liquidity and Funding
Failure to adequately manage our
cash, debt and overall liquidity and
funding requirements over the
short, medium and long-term, could
negatively impact our ability to deliver
our strategy.
Link to strategic priority
Executive Owner(s):
Chief Financial Officer
Direction of Travel -
Our ability to generate and manage
our cash, control expenditure and
other expenses underpins our ability
to repay debt and fund working
capital investment.
• Treasury operations are managed and monitored in line
with a Board-approved Treasury Policy.
• Maintenance of cash reserves and equivalents, together
with access to undrawn, revolving credit facilities.
• Close monitoring and stress testing of projected cash, debt
capacity and overall liquidity, including sensitivity analysis,
to assess the impact of the changing economic environment.
• Through our Profit Improvement and Capex Committees, there is
ongoing scrutiny and challenge of discretionary expenditure and
capital spend.
• Broader working capital management to continually improve
cash flow and reduce reliance on bank facilities.
• Frequent engagement and dialogue with the market and
rating agencies.
91 92
Annual Report 2022
Principal Risk Risk context Management and mitigation
Strategic optionality
Failure to make the optimal
strategic decisions and transform
our portfolio of businesses
accordingly, may limit our ability to
maximise returns and value for our
shareholders.
Link to strategic priority
Executive Owner(s):
Group Commercial Director
Direction of Travel -
As part of the continued maturing
of our business and to support
our ongoing growth and strategic
aims, we must continue to utilise
our corporate structure in a way
which maximises returns and value
creation for our shareholders. We
must also ensure that our corporate
structure continues to evolve to
support the strategic decisions we
may choose to make in future.
• Opportunities to optimise and streamline our portfolio
are continuously monitored.
• Opportunities to generate and realise value from
our assets are assessed on an ongoing basis.
• Acquisition and disposal activity is driven by a portfolio
strategy with a clear, defined evaluation process.
• Resources are prioritised towards the areas of our portfolio
and markets that have the greatest potential.
Assessment of the
going concern assumption
The overall financial performance of the business has remained
robust with a strong liquidity position maintained throughout
the year. In addition, as at the balance sheet date, the Group
had a total of £170 million in an undrawn Revolving credit
facility (“RCF”) due to mature in December 2024, along with
£473 million readily available cash held on the balance sheet.
Net debt at this date was £516 million (31 December 2021: net
cash £305 million), with net debt of £181 million (31 December
2021: net cash £44 million) before the inclusion of IFRS 16 lease
liabilities that mature over a period of up to 25 years.
The Group holds a €600 million seven-year loan facility
agreement due to mature in December 2026 and during the
year an incremental £156 million banking facility was provided
by the Group’s existing lenders ranking pari passu with the
existing facility. This new facility expires in October 2025. While
there are no financial covenants attached to the €600 million or
£156 million loan facilities, the covenants attached to the RCF
are linked to gross debt leverage, and become effective when
the facility is drawn upon. This covenant requires the Group to
maintain the ratio of gross debt over adjusted EBITDA to below
7.60, which is reviewed regularly, although as noted the facility
is not drawn down. This facility is not forecast to be drawn in
the future period.
The going concern assessment period is the twelve months
from the date of this report to 30 April 2024.
In order to satisfy the going concern assumption, the Directors
of the Group review its Budget periodically, which is revisited
and revised as appropriate in response to evolving market
conditions. The Directors have considered the Budget and
forecast prepared through to 30 April 2024.
Refer to the Viability statement for further information
on the stress test scenarios that have been applied
to the Group’s forecast.
Viability assessment period
In considering the viability of the Group, the Directors
felt that an appropriate period of time was the three-year
period between 31 December 2022 to December 2025 over
which to assess the Group’s prospects. This is consistent
with Group’s business model and strategic planning period
approved by the Board. A roll forward from the three year
assessment period is performed for the purposes
of impairment.
The Group has applied financial modelling to the
assessment of going concern and viability to assess
the base case and apply stress testing.
The base case
The Group’s strategic planning cycle includes an annual
Budget process, which is reviewed by the Board. This
planning process involves modelling under a series of
assumptions. Severe but plausible downside scenarios were
also modelled setting out impacts of a combination of the
principal risks, as well as a reverse stress test to identify what
would be required to either breach covenants or run out of
liquidity. This process is led by the Group CFO, Commercial
Director and Deputy Group CFO along with the Board and
Chair and CEO providing further direction to align strategic
initiatives. Following the completion of the separation of the
business units in the year, more detailed granular information
has also been available which has supported decision
making on strategic initiatives. Forecasts have been prepared
on a divisional level. The Directors of the Group review
its Budget periodically, which is revisited and revised as
appropriate in response to evolving market conditions.
In considering the Group’s financial position the Directors
have considered:
• Expected future growth of trading businesses;
• The committed and expected pipeline
of its Ingenuity business;
• Margins expected to be achieved in the future; and
• Wider market and industry specific factors.
The Directors have also considered the liquidity of the
Group as well as available facilities and note that as at
the balance sheet date, the Group had a total of £170m in
undrawn facilities, along with £473m readily available cash
held on the balance sheet. Net debt at this date was £516m
(note 18) and net debt of £181m before the inclusion of IFRS
16 lease liabilities.
In December 2019, the Group entered into a €600m seven
year loan facility agreement due to mature in December 2026
and a £170m Revolving Credit Facility (“RCF”) due to mature in
December 2024. During the year an incremental £156 million
banking facility was provided by the Groups existing lenders
Going concern statement
As a result of the analysis performed, including potential severe
but plausible scenarios, the Board believes that the Group is
able to adequately manage its financing and principal risks
and that the Group will be able to operate within the level of
its facilities and meet the required covenants for the going
concern assessment period. Based on the above activity, the
Directors are satisfied that it is appropriate to prepare the
financial statements of the Group on a going concern basis.
Viability statement
The Directors have voluntarily adopted the UK Corporate
Governance Code, in which the Directors are required to
issue a Viability Statement declaring whether they believe
the Group is able to continue to operate and meet its
liabilities for the three year period to December 2025, taking
into account its current position and principal risks. The
Directors assessed the prospects of the Group by reference
to its current financial position, its recent and historical
financial performance, its forecasts for future performance,
its business model (pages 13-20), strategy (pages 11-12)
and its principal risks and mitigating factors (pages 87-93).
In addition, the Board regularly reviews the financial
position of the Group, its liquidity and financial forecasts.
ranking pari passu with the existing facility. This new facility
expires in October 2025. There are no key covenants attached
to the €600m or £156m loan facilities which are drawn down,
but the covenants attached to the RCF are linked to gross
debt leverage and become effective when the facility
is drawn upon. This facility is not currently drawn down,
and not forecast to be drawn in the future period.
Stress tests
Several stress test scenarios have been applied
to the Group’s forecast, including but not limited to:
• Nutrition gross profit margin remains at historic
lows seen in FY22 for a further prolonged period;
• Beauty revenue declines by 10%;
• Below budgeted contract wins in Ingenuity
Commerce of 25%; and
• A decline in the cash flow conversion rate of 10%.
Any mitigating actions available to protect working capital
and strengthen the Group balance sheet, including
deferring non-essential capex and increased cost control,
such as reducing stock levels, new customer marketing
investment and investment in the platform. A severe but
plausible downside modelled the impact of all five scenarios
above occurring simultaneously.
Further, the Directors have assessed two key metrics to
ensure that the Group has the ability to continue to trade,
alongside complying with its current banking facilities.
• Cash headroom: The Group’s forecast shows material
cash headroom, that management are confident give
the Group the ability to continue to trade and capitalise
on market opportunities as they develop; and
• Leverage (defined as gross debt / adjusted EBITDA).
If the Group was to draw upon its currently undrawn
RCF, it would be required to maintain a leverage ratio
of less than 7.60 times. The forecasts reviewed suggest
that while the facility is not required, if it were there
would be enough headroom to satisfy this covenant.
The Director’s note that while the wider global economy
is suffering as a result of high inflation and various global
recessions, the Group has a number of mitigating actions
available to it to provide suitable cash headroom in the
event of a declining sales and depressed margin scenario
as noted above, including but not limited to deferring
non-essential capex, along with certain cost control actions.
93 94
Annual Report 2022
Factor Link to principal risks
Stress test scenarios involving a depression in margin,
a below revenue performance within Ingenuity Commerce
and Beauty, along with a decline in cash conversion has
been run together to show an unlikely but plausible worst
case scenario including an assessment of the Group’s
longer-term prospects. We anticipate that these scenarios
would include any further uncertainties that may come from
the impact of the current macroeconomic climate (including
the impact of the Russian invasion of Ukraine) with high
inflation and various global recessions.
Note associated potential impacts were considered
within the following principal risks review: Cyber
Security & Data Privacy; Third Party Reliance;
Talent; Infrastructure and Supply Chain; Ingenuity
E-Commerce Platform; Customer Needs; Innovation;
Legal and Regulatory Compliance; Liquidity and
Funding, Geopolitical and Economic Uncertainty,
Strategic Optionality, Culture; and Climate Change,
Environmental and Social Responsibility.
The worst case scenario outlined above did not include any
mitigating actions available. There are a number of actions
that management would take to protect working capital
and strengthen the balance sheet if any of the scenarios
outlined above were encountered. These include deferring
non-essential capex and increased cost control.
Based upon the assessment of the sensitivity built into
the scenarios tested, the Directors confirm that they have
a reasonable expectation that the Group will be able to
continue in operation to meet its liabilities as they fall
due over the three-year assessment period.
Reverse stress test
A reverse stress test was modelled to identify the point
at which liquidity is exhausted. The model would have to
see a significant decline in revenue and margins compared
with the stress test set out above. Such a scenario, and the
sequence of events which could lead to it, is considered
to be extremely remote. Whilst the occurrence of one
or more of the principal risks has the potential to affect
future performance, none of them are considered likely
either individually or collectively to give rise to a trading
deterioration of the magnitude indicated by the reverse
stress testing and to threaten the viability of the Group
over the three-year assessment period.
Assessment of viability
In making the Viability Statement, the Board,
supported by the Audit and Risk Committees,
carried out a robust assessment of the Group’s
viability, principal risks and uncertainties facing
THG for the next three years, as described on
pages 87-93, which could impact the
business model taking into account:
9695
Annual Report 2022
Directors’ Report disclosures
The Directors present their report, together with
the audited consolidated financial statements of the
Company, for the financial year ended 31 December
2022. In accordance with section 414C(11) of the
Companies Act, the Company has chosen to provide
disclosures and information in relation to a number
of matters which are covered elsewhere in this
Annual Report. These matters, together with those
Information Section in the Annual Report Page(s)
Risk management (including principal and emerging risks) Strategic Report Pages 83-95
Going concern statement Strategic Report Page 93
Post balance sheet events Directors’ Report Page 104
Future developments of the Company Strategic Report Throughout the
Strategic Report
Pages 3-104
Greenhouse gas emissions Strategic Report Pages 59-64
Directors’ biographies Governance Report Pages 108-110
Corporate governance arrangements Governance Report Pages 105-122
Directors’ conflicts of interest Governance Report Page 120
Related Party Transactions Financial Statements Pages 213-215
Statement of engagement with employees Strategic Report Pages 47-54
Statement of engagement with suppliers, customers and
others in a business relationship with the Company
Strategic Report Pages 47-54
Directors
Biographies of those Directors who served during the 2022
reporting period and who were in office at 31 December
2022, and remain in office as at the date of this Directors’
Report, are contained in the Governance Report on
pages 108-110. All of these Directors held office throughout
2022 with the exception of Charles Allen, who was
appointed on 22 March 2022, and Gillian Kent and Dean
Moore, who were both appointed on 15 September 2022.
Further, on 24 January 2023 NED Damian Sanders was
appointed to the role of CFO and John Gallemore, the
incumbent CFO, was appointed to the role of COO.
All Directors will offer themselves for election or re-election
(as appropriate) by Shareholders at the AGM.
Directors’ interests
Details of Directors’ beneficial and non-beneficial
interests in the Shares are detailed in the Directors’
Remuneration Report on page 151. No share awards
were granted to Executive Directors under the
Company’s share schemes during the 2022
reporting period.
Qualifying third party indemnification
and insurance
Pursuant to the Articles of Association and their
service contracts/letters of appointment (as appropriate),
Directors benefited from qualifying third party indemnity
provisions for the purposes of section 236 of the
Companies Act throughout the 2022 reporting period
and up to the date of this Directors' Report. The Company
also maintained Directors' and Officers' Liability
Insurance throughout the 2022 reporting period.
Appointment and replacement of Directors
The rules for appointing and replacing Directors are set out
in the Articles of Association. Directors can be appointed
by the Board or by ordinary resolution of the Company.
A Director can be removed from office by the Company
passing an ordinary resolution or by notice being given
by all other Directors.
Powers of the Directors
The Directors may exercise all the powers of the
Company subject to the provisions of the relevant
legislation, the Articles of Association and any directions
given by the Company in a general meeting.
Share capital
Subject to the Companies Act and the Articles of
Association, but without prejudice to the rights attached
to any existing Share, any Share may be issued with,
or have attached to it, such rights or restrictions as the
Company may decide by ordinary resolution or, if no
such resolution is in effect, as the Board may decide so
far as the resolution does not make specific provision.
No such resolution is currently in effect. No Share will,
without the prior written consent of the holder of the
Special Share, have attached to it (either at the time
of its creation or at any subsequent time) any rights in
respect of voting which are not identical in all respects
with those attached to the Ordinary Shares, D1 Shares,
D2 Shares, E Shares, F Shares, G Shares and H Shares.
Purchase of own Ordinary Shares
At the 2022 AGM the Company was granted authority by its
Shareholders to purchase up to 10% of its ordinary issued
share capital, in accordance with the Articles of Association.
No Shares were bought back under this authority during
the 2022 reporting period or in the period from 1 January
2023 to the date of this Directors’ Report. This buyback
authority will expire at the conclusion of the AGM, when
the Directors intend to propose the authority be renewed.
Allotment of Shares
Under the Companies Act, the Directors may only allot Shares
if authorised to do so by Shareholders in a general meeting.
The Directors were granted authority by Shareholders
to allot securities in the Company up to an aggregate
nominal amount of £2,291,231.67 and to allot securities,
without the application of pre-emption rights, up to
a nominal amount of £343,684.75 and a further £343,684.75
in connection with an acquisition or other capital
investment of a kind contemplated by the Statement
of Principles on Disapplying Pre-Emption Rights.
These authorities apply until the conclusion of the AGM
when the Company will seek Shareholder approval to
renew them, with detailed explanatory notes included
within the Notice of Meeting.
required under The Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment)
Regulations 2013, are cross-referenced in the table
below and together form part of this Directors’ Report.
The Governance Report, contained on pages 105-122,
is incorporated by reference into this Directors’ Report.
Articles of Association
In accordance with the Companies Act, the Articles of
Association may only be amended by special resolution
at a general meeting of Shareholders. The Articles of
Association are available on the Company's website at:
https://www.thg.com/investor-relations/
key-governance-documents.
Annual General Meeting
The AGM will be held at The Bowdon Rooms,
The Firs, Bowdon, Altrincham WA14 2TQ on 21
June 2023 at 1:00 p.m.. The Notice of Meeting,
together with explanatory notes, will be sent
to Shareholders on or around the time of this
Annual Report.
Directors' Report
97 98
Annual Report 2022
Share class
Number of Shares
Percentage of Company's fully
diluted issued share capital
Allotted, called up and fully paid Ordinary Shares 1,265,377,243 88.06
Allotted, issued and partly paid D1 Shares 56,082,651 3.90
Allotted, called up and fully paid D2 Shares 1 7,74 1 n/a
Allotted, issued and partly paid E Shares 48,995,797 3.41
Allotted, issued and partly paid F Shares 27,122 ,2 8 7 1.89
Allotted, issued and partly paid G Shares 17,494,614 1.22
Allotted, issued and partly paid H Shares 0 n/a
Allotted, called up and fully paid Special Share 1 n/a
Allotted, issued and fully paid Deferred 1 Shares 313,257 0.02
Allotted, issued and partly paid Deferred 2 Shares 21,563,860 1.50
Total 1,436,967,451 100
Rights and obligations attaching to Shares
The rights attaching to the Shares, as detailed within
the Articles of Association, are set out below.
(a) Ordinary Shares
The Ordinary Shares rank pari passu in all respects and
carry the right to receive all dividends and distributions
declared, made or paid on, or in respect of, the Ordinary
Shares.
Subject to the rights of the Special Share and subject to
disenfranchisement in the event of non-payment of any call
or other amount due and payable in respect of any Share
or non-compliance with any statutory notice requiring
disclosure of the beneficial ownership of any Share, on a
show of hands every Shareholder present in person or by
proxy has one vote and on a poll every Shareholder present
in person or by proxy has one vote for every Ordinary Share
that they hold.
Electronic and paper proxy appointments and voting
instructions must be received no later than 48 hours
(excluding any part of a day that is not a working day)
before a general meeting.
Pursuant to article 69.7 of the Articles of Association,
the Special Share will retain its rights on a transfer by
transmission upon the death of its holder to a Permitted
Transferee, being any person that is not: (i) an employee
of the Company or Director or any subsidiary undertaking
of the Company; or (ii) a person acting in concert with
any person listed in (i) at the time of transfer of the Special
Share. Similarly, in the event that the transmittee is not the
holder's intended beneficiary, a transmittee who produces
evidence of entitlement to the Special Share to the Board
may choose to have the Special Share transferred to
another person who is the intended beneficiary of the
holder's estate, so long as that person is also a Permitted
Transferee.
The holder of the Special Share is Matthew Moulding,
the Chief Executive Officer.
As at 31 December 2022 Matthew Moulding was also
interested in 198,744,095 Ordinary Shares, representing
15.71% of the total issued Ordinary Shares; 50,550,450 D1
Shares, representing 90.14% of the total issued D1 Shares;
360 D2 Shares, representing 2.03% of the total issued D2
shares; 43,641,266 E Shares, representing 89.07% of the
total issued E Shares; 20,197,808 F Shares, representing
74.47% of the total issued F Shares; 7,733,792 G Shares,
representing 44.21% of the total issued G Shares; and
18,346,774 Deferred 2 Shares, representing 85.08%
of the total issued Deferred 2 Shares.
(c) D1 Shares, D2 Shares and E Shares
The D1 Shares, D2 Shares and E Shares are non-voting
ordinary shares and do not carry the right to participate
in dividends of the Company.
The holders of D1 Shares, D2 Shares and E Shares may
convert their D1 Shares, D2 Shares and E Shares into
Ordinary Shares (on the basis of, as applicable, one
Ordinary Share per D1 Share or E Share or 185 Ordinary
Shares per D2 Share).
(d) F Shares, G Shares and H Shares
The F Shares, G Shares and H Shares are non-voting
ordinary shares and do not carry the right to participate
in dividends of the Company.
The holders of F Shares, G Shares and H Shares may
exercise put options to convert their F Shares, G Shares
and H Shares into Ordinary Shares (on the basis of,
as applicable, one Ordinary Share per F Share, G Share
or H Share). The put options may be exercised for
a period of 10 years from the end of the performance
period (which ended on 31 December 2022).
(e) Deferred 1 Shares and Deferred 2 Shares
The Deferred 1 Shares and Deferred 2 Shares are non-
voting ordinary shares and do not carry the right to
participate in dividends of the Company.
The Deferred 1 Shares and Deferred 2 Shares may be
purchased by the Company, provided it is lawful for the
Company to purchase them, for an aggregate sum of £1.00.
Restrictions on transfer or holdings
of securities in the Company
With the exception of the following, there are no restrictions
on the transfer of, or limitations on holding, securities
in the Company:
• The Company may, pursuant to the Articles of
Association and the Companies Act, send out
statutory notices to those it knows, or has reasonable
cause to believe, have an interest in its Shares, asking
for details of those who have an interest in a particular
holding of Shares and the extent of their interest.
When a person receives a statutory notice and fails
to provide any information required by the notice in
the time specified within it, the Company can apply
to a court for an order directing, amongst other things,
that any transfer of the Shares which are the subject
of the statutory notice is void.
• The Directors may, without giving any reason,
refuse to register the transfer of any certificated
Ordinary Shares which are not fully paid.
• Transfers of uncertificated Ordinary Shares must
be carried out using CREST, the central securities
depository for markets in the UK and for Irish
stocks, and the operator of the relevant system
or the Directors can refuse to register a transfer
of an uncertificated Ordinary Share, in accordance
with the regulations governing the operation of
CREST.
• The Special Share is subject to transfer restrictions
as set out at paragraph (b) above.
Except as set out above and as permitted under applicable
statutes, there are no limitations on the voting rights of
holders of a given percentage, number of votes or deadlines
for exercising voting rights.
(b) Special Share
The Special Share is (save as noted below) a non-voting
share that carries no economic rights.
Immediately on a Change of Control (as defined in the
Articles of Association) of the Company, the Special Share
will automatically carry such number of votes on any
resolution put to Shareholders as is necessary to ensure the
effective passing or defeat of that resolution.
The rights attributable to the Special Share will cease on
the earlier of: (i) 16 September 2023 (being the date falling
three years after the date of Admission); (ii) the transfer (in
whatever manner) of the Special Share to any person other
than pursuant to article 69.7 of the Articles of Association
(as explained below); and (iii) if a person who has become
the holder of the Special Share in the event of the holder's
death ceases to qualify as a Permitted Transferee (as
defined in the Articles of Association). In the case of (i), (ii)
and (iii), the Company may purchase or cancel the Special
Share at any time or otherwise deal with the Special Share
as permitted by the Companies Act.
Share structure
The Company has a Standard Listing on the London Stock Exchange and is the holding company of the Group.
The Company has ten share classes, as set out in the table below, and as at 31 December 2022 the Shares in issue
were as follows:
99 100
Annual Report 2022
Dividends
Subject to the Companies Act and the Articles of
Association, the Company may, by ordinary resolution,
declare dividends and the Directors may decide to pay
interim dividends. A dividend must not be declared unless
the Directors have made a recommendation as to its
amount. Such a dividend must not exceed the amount
recommended by the Directors and no dividend may be
declared or paid unless it is in accordance with members'
respective rights.
No dividends were declared, nor will be distributed,
for the financial year ended 31 December 2022 (2021: £nil).
Change of control
Other than the terms of the agreement between
Matthew Moulding and the Company, as detailed
under the Significant contractual arrangements
disclosure which follows, there are no agreements
between THG and its Directors or employees providing
for compensation for loss of office or employment
(whether through resignation, purported redundancy
or otherwise) by reason of a takeover bid.
Details concerning the impact on annual bonus in the event
of a change of control are set out in the Remuneration
Policy. Generally, any annual bonus awards and unvested
LTIP awards would be pro-rated for time and performance
in the event of a change of control whereas any deferred
Significant contractual
arrangements
The Company is party to a relationship agreement
with Matthew Moulding which regulates the ongoing
relationship between the two parties (the “Relationship
Agreement”). The principal purpose of the Relationship
Agreement is to ensure that the Company is capable
of carrying on its business independently of Matthew
Moulding and that all transactions and arrangements
between the Company and Matthew Moulding are
conducted on normal commercial terms. The provisions
of the Relationship Agreement imposing certain obligations
on Matthew Moulding will remain in full force and effect,
in respect of Matthew Moulding, for so long as: (i) the
rights of the Special Share remain in force; and/or (ii) either
Matthew Moulding beneficially owns, together with any
of his associates, at least (a) 5% of the fully diluted share
capital of the Company or (b) 10% of the Ordinary Shares.
THG Intermediate Opco Limited and THG Operations
Holdings Limited are parties to: (i) a senior facilities
agreement (Term Loan B, December 2019); and (ii)
a £156m facilities agreement (October 2022), both
of which are subject to mandatory prepayment
provisions on a change of control or the sale of all,
or substantially all, of the assets of THG Operations
Holdings Limited and its restricted subsidiaries.
Other than as disclosed above, there are
no significant agreements to which the Company
is a party that take effect, alter or terminate upon
a change of control following a takeover bid.
The Company does not have any agreement with any
Director or employee that would provide compensation
for loss of office or employment resulting from a
change of control on a takeover, except that the terms
of the Company’s share schemes and plans may
provide for the vesting of employee options and/
or awards in the circumstances of a takeover.
Donations
During the 2022 reporting period the Group made several
charitable donations totalling £0.4m (2021: £1.3m). THG did
not make any political donations during 2022 (2021: £nil).
Overseas branches
Whilst the Group does not operate any overseas branches,
subsidiaries have been established in the following
countries: Australia, China, France, Germany, Guernsey,
India, Japan, Jersey, the Netherlands, Poland, Portugal, the
Republic of Ireland, Singapore, Spain, Sweden, Ukraine,
the United Arab Emirates and the United States of America.
As a Group we continue to assess the ongoing situation in
Ukraine and Russia, with our key focus being to safeguard
our employees. Arrangements were put in place to
support the immediate relocation of employees where
required, together with the development of longer-term
resettlement proposals and the provision of appropriate
financial support. Welfare calls were extended to all
Group employees who have ties to the affected regions
and additional targeted monitoring groups have been
established to actively review intelligence on an ongoing
basis to ensure the Group continues to adapt accordingly.
From an operational perspective, all THG own-brand
deliveries have been temporarily suspended across
Russia and Ukraine and the Group continues to work
with its courier partners as the situation develops.
Necessary actions have also been implemented
internally to ensure continued compliance with all
applicable sanctions and related notices and guidance.
Research and development
THG and its third-party commerce clients are all
powered by THG Ingenuity, the Group’s proprietary
technology platform. In addition to providing end-to-end
e-commerce functionality, THG Ingenuity provides the
Group with several important competitive advantages.
Specifically, the commercial teams review real-time
transactional and customer insight data which informs
trading decisions that are then executed within short
time frames. In order to remain competitive and to
promote innovation, investment into THG Ingenuity from
a People and capex perspective is a key Group priority.
All notifications made to the Company under the DTRs are released to the market via a Regulatory Information Service
and made available on the Company’s website at: https://www.thg.com/investor-relations/regulatory-news/.
Return of capital
A liquidator may, on obtaining any sanction required by law,
divide amongst the members in kind the whole or any part of
the assets of the Company and may, for that purpose, value
any assets and determine how the division is carried out as
between the members or different classes of members.
Shares held on trust
The Company has established an employee benefit trust
(“EBT”) to hold Ordinary Shares to satisfy awards made under
the Employee Incentive Plan. At the date of this Directors’
Report the EBT currently holds 77,762,418 Ordinary Shares.
Substantial shareholdings
Disclosable interests of 3% or more in Ordinary Shares as at 31 December 2022 and 31 March 2023 were as follows:
Shareholder
Percentage of Ordinary
Shares as at 31 December
2022
Percentage of Ordinary
Shares as at 31 March
2023
Matthew Moulding 15.71 15.30
Sofina Capital S.A. 9.13 8.89
Balderton Capital (UK) LLP 7.66 7.46
Qatar Investment Authority 7.52 7.32
THG PLC EBT 3.47 5.90
elements of bonus would not be. While the Remuneration
Committee has the discretion not to pro-rate for time,
its normal policy is to do so. The Remuneration
Committee’s discretion not to pro-rate would only
be used if there was an acknowledged business case
which would be fully explained to Shareholders.
The Company has entered into various agreements
with third parties, as well as contracts with third-
party service providers, which provide such
parties with a right to terminate their agreement
in the event of a change of control.
101 102
Annual Report 2022
Directors’ Statement
of Responsibility
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable UK law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have elected to prepare the Group financial
statements in accordance with UK-adopted IFRS and the
parent company financial statements in accordance with
UK Generally Accepted Accounting Practice (UK Accounting
Standards and applicable law), including Financial Reporting
Standard 101 Reduced Disclosure Framework (“FRS 101”).
Under company law the Directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group
and the Company and of the profit or loss of the Group
and the Company for that period.
In preparing these financial statements, the Directors
are required to:
• select suitable accounting policies in accordance with
IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors and then apply them consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• present information, including accounting policies,
in a manner that provides relevant, reliable, comparable
and understandable information;
• provide additional disclosures when compliance with
the specific requirements in IFRS (and in respect of
the parent company financial statements FRS 101) is
insufficient to enable users to understand the impact
of particular transactions, other events and conditions
on the financial position and financial performance
of the Group and Company;
• in respect of the Group financial statements, state
whether UK-adopted IFRS have been followed, subject
to any material departures disclosed and explained in
the financial statements;
• in respect of the parent company financial statements,
state whether applicable UK Accounting Standards,
including FRS 101, have been followed, subject to any
material departures disclosed and explained in the
financial statements; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company and /or the Group will continue in business.
by the expected return to historical margins within THG
Beauty and THG Nutrition. THG Ingenuity adjusted EBITDA
margin will scale over time as the revenue mix evolves and
all service lines are sold either individually or as a complete
solution, with management targeting an aspirational 5-year
margin of c.7.5%.
Our focus over the last few years has been on investment
as we scaled our infrastructure to meet the step change
in demand during the pandemic. Whilst we continue to
selectively scale the business, it is clear that we can begin
to enjoy the benefits of past investment from a cash and
profitability perspective. Capital expenditure for the Group
is therefore expected to be up to £135m in FY 2023 (FY
2022: £176m), and in the range of £130m to £140m in FY
2024, remaining between 5.5% to 6.5% of revenue over
the medium-term.
Margin accretion, reduced capital expenditure and cash
adjusting items (c.£15m in FY 2023, a 65% reduction on FY
2022) and working capital rationalisation all support a clear
path to being free cash flow neutral in FY 2023, turning
positive in FY 2024.
Post balance sheet events
At the year end, certain loss-making categories and
territories primarily within THG OnDemand were placed
under strategic review. Post year end, and following
completion of the strategic review (further details on which
are included in the “Section 172 Statement Stakeholder
Engagement” section), the Board approved the exit from
THG OnDemand. In Q4, the Board approved the exit of
ProBikeKit. These operations will be fully exited throughout
the course of 2023. The optimal exit route remains under
review. The result of this decision has led to an inventory
provision totalling £25.5m, other costs of £6.9m and
impairment of £3.8m which have been recognised within
cost of sales and administrative expenses respectively and
included within Adjusted Items (note 4). This has been
concluded as an adjusting post balance sheet event.
On 28 February 2023, the sale completed in respect of one of
the non-core freehold assets recorded within the assets held
for sale category (note 12.2). The sale generated cash proceeds
of £5m which reflected the carrying value of the asset.
No other post balance sheet events have occurred.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s and the Group’s transactions and disclose
with reasonable accuracy at any time the financial position
of the Company and the Group and enable them to ensure
that the Company and the Group financial statements
comply with the Companies Act.
The Directors are also responsible for safeguarding the
assets of the Group and parent company and thus for
taking reasonable steps for the prevention and detection
of fraud and other irregularities.
In accordance with DTR 4.1.12R, each Director whose name
and position appears on pages 108-110 of the Governance
Report confirms that, to the best of their knowledge:
• the consolidated financial statements, prepared in
accordance with UK-adopted IFRS, give a true and
fair view of the assets, liabilities, financial position
and profit of the parent company and undertakings
included in the consolidation taken as a whole;
• the Annual Report, including the Strategic Report,
includes a fair review of the development and
performance of the business and the position
of the Company and undertakings included
in the consolidation taken as a whole, together
with a description of the principal risks and
uncertainties that they face; and
• they consider the Annual Report, taken as a whole,
to be fair, balanced and understandable, providing the
information necessary for Shareholders to assess the
Company’s position, performance, business model
and strategy.
Outlook and market demand
The Board anticipates FY 2023 Group revenue growth
across continuing divisions of low to mid-single digit.
Adjusted EBITDA is expected to be in line with the
company consensus, with a significant weighting to
the second half of the year.
The profitability and cashflow improvements during the
first quarter support the expectation for significant margin
recovery through the year. The decision to discontinue
non-core categories, coupled with ongoing deflation in
whey commodity prices and business model efficiencies
driving improved operating leverage, underpins the margin
confidence for FY 2023.
These factors provide operational leverage for the Group
to rebuild towards historical adjusted EBITDA margins
of around 9.0% over the medium-term. This is supported
Approval of Directors’ Report
This Directors’ Report was approved and issued
by the Board and signed on its behalf by
James Pochin
General Counsel and Company Secretary
17 April 2023
Audit and External Auditor
At the date of approval of this Directors’ Report each
Director confirms that:
• to the best of their knowledge, there is no relevant
audit information that has not been brought to the
attention of the External Auditor; and
• they have taken all steps required of them to make
themselves aware of any relevant audit information
and to establish that the External Auditor was aware
of that information.
This confirmation is given and should be interpreted
in accordance with the provisions of section 418 of the
Companies Act.
EY has indicated its willingness to continue in office as
External Auditor and, upon the recommendation of the
Audit Committee, a resolution to reappoint EY as such will
be proposed at the AGM. Any remuneration received by EY
for: (i) auditing this Annual Report; and (ii) any other (non-
audit) services has been disclosed in note 5 to the Group’s
financial statements.
103 104
Annual Report 2022
Governance Report
Dear Shareholders
I have pleasure in introducing this year’s Governance Report, the third since Admission,
which details the key governance items considered and changes implemented during
2022 (and to the date of this Governance Report). Whilst application of the Code is only
mandatory for companies with a Premium Listing, the Company chose to report against
it following Admission to reinforce its commitment to establish a robust governance
framework that supports the successful delivery of its strategic aims and objectives.
Throughout the 2022 reporting period the Group’s governance standards and infrastructure
remained subject to ongoing review to ensure they continued to evolve, as appropriate,
for an organisation of the size, nature and stage of development of THG.
Code compliance
As you will note from the Corporate Governance Statement
which follows, the Company complied in full with the Code
during the 2022 reporting period with the exception of
three departures, one of which has been rectified since my
appointment to the Board in March 2022. This improved
Code adherence evidences the Company’s desire to further
enhance its governance practices and it is anticipated
that the remaining two Code departures will, in time,
also be rectified following the appointment of additional
independent NEDs (further details on which follow).
Board and Board Committee
composition
The Board recognises the importance of strong corporate
governance to underpin the long-term, sustainable
prospects of the Group and considers that a fundamental
component of this is securing a suitably skilled and
experienced leadership team to oversee and guide
THG through the next stage of its governance journey.
Accordingly, a principal focus of the Nomination Committee
during 2022 was to enhance Board composition through
the appointment of suitable independent NEDs and, in
this regard, we were pleased to welcome Gillian Kent and
Dean Moore to the Board in September 2022. Additionally,
following a review of THG’s leadership needs and the
balance of skills, knowledge and experience on the Board,
we announced two changes to the Executive Leadership
Team at the beginning of 2023 – namely, the appointment
of Damian Sanders, former independent NED, to CFO and
the appointment of John Gallemore, the incumbent CFO, to
COO. Further information on these appointments, together
with details on the other Board changes which took place
during 2022, can be found within this Governance Report
and the Nomination Committee Report on pages 133-137.
Board Committee composition was also a key focus of
the Nomination Committee during 2022 to ensure that
membership remained appropriate in light of the various
Board changes which took place throughout the year. These
changes are detailed within the respective Board Committee
Reports on pages 123-157, together with current Board
Committee composition. Notably, in stepping down as an
independent NED Damian Sanders simultaneously stepped
down from certain Board Committees, including as Audit
Committee Chair and as a member of the Risk Committee.
As the Board currently comprises only two independent
NEDs, Gillian Kent and Dean Moore (excluding the Chair),
this has resulted in the non-satisfaction of the membership
requirements of these Board Committees since the date of
Damian Sanders’ appointment as an Executive Director. This
position is temporary and expected only to continue until the
appointment of at least one new independent NED in the
coming months.
The year ahead
It is anticipated that the search for suitable independent
NEDs will continue throughout 2023 and, more generally,
the structure, size and composition of the Board will remain
subject to ongoing oversight (with specific reference to
its collective balance of skills, knowledge, experience and
diversity) to ensure membership is fit for purpose and the
Group’s leadership needs are satisfied.
Further, and as noted at the outset of this Annual Report,
the intention remains to seek a Premium Listing, with timing
subject to the outcome of the FCA’s ongoing review vis-a-
vis reform of the current listing regime. Until the outcome
of this review is known, we will continue to review and
make further improvements to our corporate governance
arrangements to ensure the Group’s governance
framework is suitably mature and robust and we are
well-placed to make the step-up at the appropriate time.
We once again look forward to welcoming and
meeting with investors at the forthcoming AGM,
details of which are contained in the Notice of Meeting.
We consider this a key opportunity to engage with
our Shareholders and a suitable forum within which
ongoing and constructive dialogue can take place.
Charles Allen, Lord Allen of Kensington CBE
Independent Chair
17 April 2023
106
105
Annual Report 2022
Provision 9 and Provision 19:
(Departure rectified on 22 March 2022)
Having been appointed as CEO upon the Company’s
incorporation in 2008 and serving as Company chair from
2019 until the appointment of the Independent Chair in
March 2022, Matthew Moulding’s dual role resulted in a
departure from Code Provisions 9 and 19 during this period
(and, in the current context, from 1 January 2022 until 21
March 2022). As detailed in the 2021 Annual Report, the
need to demonstrate the clear division of responsibilities
between the leadership of the Board and the executive
leadership of the business (with respect to, for example,
appropriate levels of challenge and independence) had
previously been subject to detailed consideration but
at the same time the Nomination Committee remained
cognisant of its core responsibility to ensure that the
Company’s leadership needs were satisfied to oversee the
effective delivery and execution of the Group’s strategic
aims and objectives. Indeed, the analysis undertaken
recognised the instrumental role which Matthew Moulding’s
entrepreneurial and dynamic leadership had played
in the Group’s expansion and evolution into a global
e-commerce technology group, together with the risks
associated with the wrong appointment being made.
Nevertheless, a review of the Group’s corporate governance
arrangements was undertaken during the 2021 reporting
period which subsequently identified the need for an
independent chair and, in turn, align the Company with
the relevant Code Provisions. Following a comprehensive
recruitment process (further details on which are contained
in the Nomination Committee Report on pages 133-137),
Charles Allen was appointed to the Board as Independent
Chair on 22 March 2022, at which point the Company’s
departure from Code Provisions 9 and 19 was rectified.
Provision 11:
Excluding the Independent Chair from the calculation (as
required by the Code), three of the seven Directors were
deemed to be independent at the end of the 2022 reporting
period, thus representing a departure from Code Provision
11. Following the appointment of Damian Sanders as an
Executive Director on 24 January 2023, two of the eight
Directors are considered independent as at the date of this
Governance Report.
As detailed within this Governance Report, and as noted
in the Nomination Committee Report on pages 133-137,
the Nomination Committee (and the Board more generally)
Corporate Governance Statement
Upon Admission the Company elected to report against the Code. Whilst this is not mandatory for a company with
a Standard Listing, the Company recognises the value of effective and robust corporate governance in its continued
growth and development and in generating sustainable value creation for its Shareholders. Aside from the following
departures, the Company complied in full with the Code during the 2022 reporting period:
Board of Directors
Charles Allen,
L
ord Allen of Kensington CBE
Independent Non-Executive Chair
Date of appointment: 22 March 2022
Matthew Moulding
Executive Director & CEO
Date of appointment: 24 June 2008
Charles has extensive corporate experience across a
number of sectors, including finance, media, hospitality and
retail. Having played a key role in the creation of ITV, he is
recognised for his significant contribution to the television
industry. Charles is currently chair of Global Media &
Entertainment Limited, Balfour Beatty plc and the Invictus
Games Foundation and also advisory chair of Moelis &
Company. He is a former chair of Granada Media plc, chief
executive of Granada Group plc and ITV plc and chair of EMI
Music, Endemol and The British Red Cross. Charles has also
served on the boards of Tesco plc, Virgin Media and GET
AS and been Chief Adviser to the Home Office and a Senior
Adviser to Goldman Sachs.
Charles was vice chair of the London 2012 bid company,
non-executive director of the London Organising Committee
of the Olympic and Paralympic Games and chair of the
2002 Manchester Commonwealth Games. In 2002 he was
awarded a CBE for his services to Sport and Community
and in 2012 he was appointed a Knight Bachelor for his
services to the 2012 Olympic and Paralympic Games.
Charles received the Freedom of the City of London in
2006 and in 2013 was awarded a peerage and sits on
the Labour benches.
Matthew has been instrumental in THG’s growth,
leading its evolution from an entertainment reseller to a
global e-commerce technology group. Prior to founding
THG, he served an eight-year term as chief financial
officer of 20:20 Mobile (the Distribution Division of the
Caudwell Group) before leading its sale to private equity
for £365 million.
Matthew studied Industrial Economics at the University
of Nottingham before qualifying as a Chartered
Accountant with Arthur Andersen in 1998. His deep
e-commerce knowledge and insight, combined with his
proven entrepreneurial skills, make him best-placed to
most effectively drive THG’s strategy whilst working in
alignment with its Shareholder base.
Current external roles
Chair of Global Media &
Entertainment Limited
(and a director of associated
group companies)
Chair of Balfour Beatty plc
Chair of the Invictus
Games Foundation
Advisory chair of
Moelis & Company
Chair of Glassmoon
Services Limited
Chair of Grandmet
Management Ltd
Chair of Nell Homes Limited
Director of IGF Trading Limited
Director of Malch Limited
Current external roles
None
remains mindful of this departure and, with particular
regard to the Independent Chair’s mandate to, amongst
other things, improve independence and diversity, hopes
to rectify it during 2023 as a matter of priority. The structure,
size and composition (including diversity) of the Board
will remain under ongoing review, with due regard being
given to the balance of Executive Directors/NEDs, overall
independence and the need for appropriate succession
planning to be undertaken.
Provision 32:
As detailed within the “Board independence” section of
this Governance Report, Iain McDonald is not deemed to
be independent with reference to the tenure provisions of
the Code. However, during the 2022 reporting period Iain
McDonald was a member of the Remuneration Committee
(and remains so at the date of this Governance Report),
despite the Code recommendation that a company’s
remuneration committee should comprise only
independent NEDs.
The Board has considered the risks associated with this
Code departure and whilst, as stated in the 2021 Annual
Report, it recognises the need for independent membership
of the Remuneration Committee to demonstrate
objective oversight of, and independent challenge to, the
remuneration of Executive Directors, it remains of the
opinion that, at the present time and in the particular
circumstances of THG, it would not be in the best interests
of the Company and its Shareholders for Iain McDonald
to step down from the Remuneration Committee. Whilst
his independence may be deemed to be impaired under
the Code, the Board nonetheless considers that Iain
McDonald’s broad remuneration experience and extensive
financial expertise and investment acumen make him well-
equipped to serve on the Remuneration Committee and
enhance its overall balance of knowledge and skillsets.
Membership of the Remuneration Committee has been
carefully reviewed and, as detailed within the Remuneration
Committee Report on pages 144-157, various membership
changes took place during 2022 (and at the beginning
of 2023) to reflect changes in Board composition. It is
anticipated that the Company will continue to depart from
Code Provision 32 in respect of Iain McDonald’s continued
membership of the Remuneration Committee for the time
being, albeit the matter will be kept under ongoing review
with regard to, for example, the timing and independence
of future Board appointees.
Committee membership Committee membership
Chair n/a
Committee membership key:
A
Audit
N
Nomination
Rem
Remuneration
R
Risk
RP
Related Party
S
Sustainability
N
107 108
Annual Report 2022
Board of Directors (continued)
Damian Sanders
Executive Director & CFO
Date of appointment: 24 January 2023
(having previously served as an independent
NED from 17 November 2020)
Iain McDonald
NED
Date of appointment: 27 March 2010
John Gallemore
Executive Director & COO
Date of appointment: 24 January 2023
(having previously served as CFO from 24 June 2008)
Edward Koopman
NED
Date of appointment: 3 May 2016
Dean Moore
Independent NED & interim SID
Date of appointment: 15 September 2022
Gillian Kent
Independent NED
Date of appointment: 15 September 2022
Damian is a member of the Institute of Chartered
Accountants in England and Wales and was a
Senior Audit Partner at Deloitte LLP for over 20
years, including several years as the leader of
Deloitte’s Technology Practice in the North of
England. Damian has extensive experience of the
retail and technology sectors and has acted as
an adviser and corporate governance specialist
to a number of international listed companies.
Damian brings a wealth of experience to the
Board across audit, accounting, commercial
and risk matters and also business strategy.
His strong financial background, depth of
advisory experience and knowledge of the Group
acquired during his two-year tenure as a NED,
including serving as interim SID and as chair
and a member of various Board Committees,
make him well qualified to serve as CFO.
Iain is the founder and chief investment officer
of Belerion Capital Group Limited, established
in 2018, prior to which he was chief investment
officer of the William Currie Group Limited.
Notable investments include ASOS plc, boohoo
group plc, Metapack Limited, Eagle Eye Solutions
Group PLC, Anatwine Limited and Lifeworks
Corporation Ltd.. Iain is also chair of the UK
Digital Business Association, non-executive chair
of CentralNic Group PLC and a non-executive
director of boohoo group plc where he chairs the
remuneration committee and is a member of the
audit and nomination committees.
Iain holds a degree in Economics and Economic
History from the London School of Economics
and Political Science. He brings broad and
robust experience to the Board, substantiated by
the deep financial expertise gained in his chief
investment officer roles.
Prior to co-founding THG in 2004 and serving
as its CFO until January 2023, John was Head
of Finance of the Caudwell Group’s International
Trading Division from 2001 until 2004.
John studied Economics at the University of
Manchester before qualifying as a Chartered
Accountant with Deloitte LLP in 1994. His
business and accounting background, strong
commercial acumen and tenure in international
trading provided the requisite experience to
initially serve as CFO and now as COO, a role
which will allow him to drive the operations of the
Group and build on the progress he has overseen
in the Group’s global fulfilment footprint.
Edward is a member of the Executive Committee
of Sofina S.A. and a director of Sofina Capital.
He also sits on the board of Nuxe Group, a
French-based international skincare brand, and
GL Events S.A., a listed global player in event
management. Edward was a founding partner at
Electra Partners/ Cognetas Private Equity (now
known as Motion Equity Partners LLP) and was
also previously a Manager at Bain & Company,
having worked in investment banking at both
Baring Brothers and BNP Paribas.
Edward holds a degree from Ecole de
Management de Lyon (EM Lyon) Business
School and brings a wealth of knowledge to
the Board through his international business
experience and well-honed management skills.
Dean is a chartered accountant with over 35
years of public company experience and brings
with him a depth of City and finance knowledge,
together with significant expertise in the financial
services and retail sectors.
He was previously chief financial officer at
Cineworld Group plc, N Brown Group plc,
T&S Stores PLC and Graham Group plc and
formerly non-executive chair of Tuxedo Money
Solutions Limited. Dean is currently the interim
chief financial officer of Dignity plc (having been
an independent non-executive director upon
appointment), a non-executive director of Griffin
Mining Limited, and senior independent director
at both Cineworld Group plc and Volex PLC.
His financial and City background make him
a valuable addition to the Board and suitably
qualified to serve as interim SID and as chair
of the Remuneration Committee, interim chair
of both the Audit Committee and the Related
Party Committee and as a member of the Risk
Committee.
Gillian has had a far-reaching career in software,
internet, digital media and mobile technology
businesses and formerly held various senior
roles at Microsoft, including Managing Director
MSN UK, where she was responsible for
creating one of the UK’s largest online services
businesses. Both at Microsoft and in other roles,
including as chief executive officer of the real
estate portal Propertyfinder, she established her
expertise in building markets and brands for
products and services.
Gillian is currently a non-executive director
of Ascential plc, Mothercare plc, Marlowe plc
and SIG plc, and former positions include
non-executive director at NAHL Group PLC,
Pendragon PLC and Dignity plc and a director
of Portswigger Ltd., a leading software solution
company within the web security industry. Her
executive career and broad PLC experience
ensure Gillian is well-equipped to serve as Risk
Committee Chair and as a member of the Audit
Committee, Nomination Committee, Related
Party Committee and Remuneration Committee.
Current external roles
Senior independent director of Victorian
Plumbing Group plc
Current external roles
None
Current external roles
Non-executive director of Ascential plc
Non-executive director of Marlowe plc
Non-executive director of Mothercare plc
Non-executive director of SIG plc
Current external roles
Member of Executive Committee
of Sofina S.A.
Director of Sofina Capital
Director of Nuxe Group
Director of GL Events S.A.
Current external roles
Chief investment officer of Belerion Capital
Group Limited
Chair of the UK Digital Business Association
Non-executive chair of CentralNic Group
PLC
Non-executive director of boohoo group plc
Current external roles
Interim chief financial officer of Dignity plc
Senior independent director of Cineworld
Group plc
Senior independent director of Volex PLC
Non-executive director of Griffin Mining
Limited
Committee membership: Committee membership: Committee membership Committee membership Committee membership Committee membership:
N S
Rem
A R
Rem RP
A N R
Rem RP
Interim Chairn/a n/a n/aChair Chair Chair Chair
Committee membership key:
A
Audit
N
Nomination
Rem
Remuneration
R
Risk
RP
Related Party
S
Sustainability
109 110
Annual Report 2022
As mandated by the Code, a formal Schedule of Matters
Reserved to the Board (“Schedule of Reserved Matters”)
has been published on the Company’s website detailing
those items of business, including certain strategic items
and corporate and capital structure approvals, which are
expressly reserved for the Board’s collective consideration,
ratification and/or oversight (as appropriate). The overriding
responsibility of the Board is, however, to promote the
long-term, sustainable success of the Company, generating
value for Shareholders and contributing to wider society,
an obligation which sits at the core of Board discussions
and decision-making processes.
The Board seeks to discharge this primary duty through
the successful delivery of the Company’s five strategic
priorities which flow from the Company’s stated purpose,
namely to drive impact through scale, innovation and
expertise. THG’s purpose, together with its vision and values,
are considered within the “Our purpose, vision and values”
section of the Strategic Report on pages 8-10 but, notably, the
purpose has been determined with reference to the diversity
of the Company’s stakeholder base and formulated to guide
a strategy that aims to deliver long-term, sustainable growth,
whilst promoting environmental and social responsibility.
THG’s core values of leadership, innovation, decisiveness
and ambition, together with the recently launched value
of collaboration, underpin this approach and inform an
entrepreneurial and values-led Group culture that supports
the delivery of THG’s strategic aims and objectives, thereby
generating value for stakeholders (further details on which
are included within the “Our strategy” section of the Strategic
Report on pages 11-12).
In seeking to provide the effective and entrepreneurial
leadership required by the Code, the Board recognises the
importance of active stakeholder engagement to ensure
it remains fully apprised of the views of all relevant parties
and is therefore suitably equipped to properly discharge
the responsibilities incumbent upon it. Six key stakeholder
categories have been identified as critical to THG’s future
success and further information on these categories,
together with details of the Company’s stakeholder
engagement framework, can be found within the “Section
172 Statement Stakeholder Engagement” section of the
Strategic Report on pages 47-54. From a more focused
perspective, the Company maintains its “open door” policy
with Shareholders to allow ongoing and constructive
dialogue to take place throughout each calendar year, thus
ensuring that Shareholders’ objectives, interests and views
are understood and appropriately factored into the Board’s
consideration of key financial, operational, strategic and
ESG matters. Additionally, the Company’s annual general
meeting affords Shareholders the opportunity to engage
in person with Board members, whilst the maturing Investor
Relations programme seeks to improve dialogue with
investors and analysts alike.
Under the terms of the Schedule of Reserved Matters and
in accordance with the Code, ultimate responsibility for
the management of risk within the Company rests with
the Directors; specifically, the Board is responsible for
ensuring that a sound system of internal controls and risk
management framework are in place which allow risk to be
effectively identified, assessed and managed. In discharging
its risk management responsibilities, including overseeing
the Group’s controls framework, determining organisational
risk appetite and undertaking a robust and ongoing
assessment of the principal and emerging risks facing the
Group, the Board was supported during the 2022 reporting
period by the Audit Committee and the Risk Committee
(the activities of which are contained in the respective
Committee Reports on pages 123-132).
Full details of the Group’s risk management framework,
risk appetite and risk identification process can be found
within the “Risk management and informed decision
making” section of the Strategic Report on pages 83-95.
This section includes confirmation that, during the 2022
reporting period, the Board (assisted, as appropriate, by
the Audit Committee and the Risk Committee) reviewed
the effectiveness of the risk management framework and
internal control systems and identified no instances of
significant control failings or weaknesses.
Role of the Board
Board composition
and responsibilities
Further to a review of the Group’s corporate governance
arrangements, the need for an independent chair was
identified during the 2021 reporting period to ensure that,
in compliance with the Code, a clear division of responsibility
was established between the leadership of the Board and the
executive leadership of the business. Following an extensive
recruitment process, further details on which are contained
in the Nomination Committee Report on pages 133-137,
Charles Allen was recommended as a suitable candidate
and thereafter appointed Independent Chair in March
2022. From the start of the 2022 reporting period until the
appointment of the Independent Chair, the Board was led
by Matthew Moulding who had been appointed chair of the
Company in 2019 and who has continued to serve as CEO
since his appointment in 2008.
Acknowledging the Independent Chair’s mandate to refresh
and strengthen the Board by improving its independence
and diversity, Board composition remained an ongoing
focus of the Nomination Committee throughout 2022,
with particular consideration being given to overall
independence and the balance of Executive Directors /
NEDs (and noting that two former independent NEDs,
Tiffany Hall and Dominic Murphy, stepped down from the
NED/
Former NED
Appointment Resignation Date
Tiffany Hall x
18 March
2022
Charles Allen x
22 March
2022
Dominic Murphy x
8 June
2022
Gillian Kent x
15 September
2022
Dean Moore x
15 September
2022
Zillah Byng-Thorne x
15 September
2022
Andreas Hansson x
15 September
2022
Damian Sanders n/a n/a
24 January
2023
1
1. This is the date on which Damian Sanders stepped down as a NED
and was appointed an Executive Director.
In addition to discharging their mandated duties under
the Code (as reflected within the published SID role
description), the SID is expected to provide independent,
objective and robust oversight of and, where necessary,
challenge to all matters which come before them. Indeed,
prior to the appointment of the Independent Chair, the SID
function was viewed as affording a critical governance
overlay within the Group providing, as it did, an important
safeguard where any conflict may have been perceived
to arise from Matthew Moulding’s dual role.
During the 2022 reporting period (and noting the various
Board changes which were enacted), ongoing discussions
took place between the SID and the NEDs to ensure Board
relations were suitably fostered and Board effectiveness
optimised, including a SID-led discussion in December
2022 to appraise the Independent Chair’s performance
(further information on which can be found in the “Board
evaluation” section of the Nomination Committee Report
on pages 133-137). It is expected that the current interim
SID, Dean Moore (appointed to the position on 24 January
2023), will continue to serve as a trusted intermediary for
Directors and Shareholders alike and meet with the NEDs,
as and when considered necessary and/or appropriate,
throughout 2023 (until such times as a permanent SID
appointment is made).
More generally, Board coherence and effectiveness is
cultivated through informal debate and discussion outwith
the confines of Board and Board Committee meetings.
Such unstructured interaction amongst Board members
is considered a key means through which Board relations
can be developed, fostered and enhanced and it is
encouraged through, for example, the annual Board dinner
and biannual NED-only sessions (as introduced by the
annual Board planning cycle, referred to in the “Board
meetings and activities” section which follows).
Board in, respectively, March 2022 and June 2022 and,
thereafter, Zillah Byng-Thorne, former SID, and Andreas
Hansson, a former NED, also stepped down in September
2022). Significant progress was made in this regard during
the year and, following a twin-track external and internal
recruitment search, Gillian Kent and Dean Moore were
appointed as independent NEDs in September 2022.
Additionally, in light of the in-depth understanding of the
Group’s businesses, People and culture which Damian
Sanders had acquired during his tenure as an independent
NED, it was considered appropriate to appoint him to the
position of CFO at the start of 2023 and, simultaneously,
appoint John Gallemore, the incumbent CFO, to COO. The
considerations of, and process followed by, the Nomination
Committee in recommending these appointments and
Board changes are detailed within the Nomination
Committee Report on pages 133-137.
A summary of these Board changes is as follows:
111 112
Annual Report 2022
Dean Moore (interim)
SID
Matthew Moulding
Chief Executive Officer
• Provides leadership to the Executive
Leadership Team
• Oversees the day-to-day management
of Company and Group business
• Determines the strategic direction and
business objectives of the Group
• With the support of Senior Management,
oversees the effective implementation of
Group strategy
• Engages with key Shareholders and
stakeholders
Edward Koopman,
Iain McDonald and Gillian Kent
• Provide active and constructive
challenge and contribute to the
development of strategy
• Monitor the performance of the
Executive Directors against agreed
objectives and ensure robust risk
management
• Ensure the Board and Board
Committees fulfil their responsibilities
and are ably equipped to do so
• Ensure the Board is balanced and
appropriate succession planning is
undertaken, allowing it to provide
clear and effective leadership across
the organisation
Damian Sanders
Chief Financial Officer
• Responsible for the Group’s financial
matters and applicable legislative
and regulatory compliance
• Works with the CEO to develop
strategic objectives
• Monitors the Group’s financial
performance
• Ensures the Group remains
appropriately funded and capital
structure is effectively managed
James Pochin
Company Secretary
• Acts as secretary to the Board
and Board Committees and provides
the requisite support
• Advises the Board on all relevant
legislative, regulatory and
governance matters
• Ensures the Board has the appropriate
policies, procedures and resources
in place to function effectively and
align with best practice
• Assists with communication
between the Board and Shareholders
and is responsible for annual general
meeting organisation
John Gallemore
Chief Operating Officer
• Oversees the day-to-day management
of the Group’s global operations
• Monitors operational performance
and provides the necessary
strategic advice to ensure delivery
of operational targets
• Ensures the implementation of
business strategies and operational
capabilities to drive operational
efficiencies and alignment with the
Group’s strategic aims and objectives
The current Board comprises three Executive Directors (i.e. the CEO, the CFO and the COO) and five NEDs, three of whom
(including the Chair) are deemed to be independent in character and judgement (as considered further in the “Board
independence” section of this Governance Report).
A summary of the principal responsibilities of Board members and the Company Secretary is as follows:
Charles Allen
Independent Chair
• Provides leadership to the Board
• Facilitates constructive Board relations and the effective contribution of all NEDs
• Chairs Board meetings and promotes a culture of openness and debate
• Ensures effective and ongoing communication with Shareholders and other stakeholders
• Sets the agenda for Board meetings in conjunction with the Company Secretary
and ensures Directors receive accurate and timely information
A minimum of eight Board meetings are scheduled per
annum, with additional meetings convened on an ad
hoc basis to ensure there is ongoing and effective Board
oversight of all time-sensitive and/or material Group
matters throughout any financial year, including in respect
of key strategic, commercial and financial performance
items. During 2022 the Board met on 14 occasions, with
Board member attendance set out in the table which
follows. Director attendance at Board Committee meetings
is detailed within the various Board Committee Reports,
contained on pages 123-157 of this Annual Report.
Director 2022 Attendance
Charles Allen
1
10/11
Matthew Moulding 14/14
John Gallemore 14/14
Damian Sanders 14/14
Iain McDonald 14/14
Edward Koopman
2
13/14
Gillian Kent
3
2/3
Dean Moore
4
3/3
Zillah Byng-Thorne
5
9/11
Andreas Hansson
6
11/11
Dominic Murphy
7
6/6
Tiffany Hall
8
3/3
1. Charles Allen attended 10 of the 11 Board meetings which took place
following his appointment on 22 March 2022. He was unable to attend
the Board meeting immediately following his appointment due to
a prior commitment.
2. Edward Koopman was unable to attend one of the 14 Board meetings
which took place during 2022 due to a conflicting commitment.
3. Gillian Kent attended two of the three Board meetings which took place
following her appointment on 15 September 2022. She was unable to
attend the Board meeting immediately following her appointment due
to a prior commitment.
4. Dean Moore attended the three Board meetings which took place
following his appointment on 15 September 2022.
5. Zillah Byng-Thorne attended nine of the 11 Board meetings which took
place prior to her stepping down from the Board on 15 September 2022.
6. Andreas Hansson attended the 11 Board meetings which took place
prior to him stepping down from the Board on 15 September 2022.
7. Dominic Murphy attended the six Board meetings which took place
prior to him stepping down from the Board on 8 June 2022.
8. Tiffany Hall attended the three Board meetings which took place prior
to her stepping down from the Board on 18 March 2022.
As disclosed in the 2021 Annual Report, the Company
launched a new online tool during the 2021 reporting period
which allows for the distribution of all Board and Board
Committee documentation via a secure electronic platform.
This platform also serves as a centralised storage facility
through which documentation can be stored and accessed
by Directors on an ongoing basis. During 2022 the use
of this platform became more deeply embedded within
the enhanced governance processes of the Company,
providing, as it does, increased security around information
distribution and storage, and is now the standard means
by which monthly Board packs and Board Committee
papers are circulated.
As detailed in the Nomination Committee Report contained
within the 2021 Annual Report, the form and content of
monthly Board meetings was an area highlighted for
consideration in the 2021 Board evaluation, including the
proposal to streamline and invert the standard Board
agenda by, for example, restricting the more fulsome
Divisional updates and thereby allowing increased focus
on key topics such as People, Sustainability and Investor
Relations. Following the appointment of the Independent
Chair in March 2022 this output was given further
consideration and during 2022 certain changes were
effected vis-à-vis the format and content of Board meetings.
Whilst monthly Board packs continue to incorporate
the previous month’s financial results, on a Group and
Divisional basis, content has been refined, as considered
appropriate, and the agenda streamlined and inverted as
proposed. Senior Management now present on a “taken
as read” basis in terms of Board pack material, with a
more focused Q&A element having been introduced into
meetings. Regular “deep dives” also take place into key
Divisional and/or Group topics on which Directors have
requested further insight/discussion. This is an item which
remains subject to ongoing Board consideration, as detailed
within the “Board evaluation” section of the Nomination
Committee Report on pages 133-137.
To ensure that Directors have sufficient time to prepare for
meetings and read and evaluate any supporting papers,
Board and Board Committee documentation is generally
issued no later than three working days in advance of
a meeting, together with the meeting agenda which is
agreed between the Company Secretary and relevant
Board Committee Chair (albeit timings may be impacted
on occasion by the volume, source and/or availability of
information). The minutes of any previous Board meeting(s)
are included within monthly Board packs and these are
tabled for approval (subject to any comments/required
amendments), as is the case for Board Committee minutes
which will also be circulated with supporting papers and
tabled for approval.
Board meetings and activities
• Acts as a sounding board for the
Chair and supports, as required,
in the discharge of their duties
and responsibilities
• Acts as an intermediary for the
Directors as and when necessary
• Available to Shareholders with
concerns which have not been
resolved through the normal
communication channels
• At least annually, meets with the
NEDs, in the absence of the Chair,
to appraise the Chair’s performance
NEDs
113 114
Annual Report 2022
Executive Leadership Team
• Executes delivery of agreed strategic objectives
• Oversees day-to-day management of Group operations
• Provides regular Board updates on operational performance
Sustainability Committee
Chair: Iain McDonald
Related Party Committee
Chair (interim): Dean Moore
• Reviews and ensures appropriate and effective strategies, policies and
operational controls are in place to conduct business in a responsible
manner, including assessing and monitoring performance against 2030
Sustainability Strategy and ESG targets
• Oversees compliance with all applicable sustainability-related legal and
regulatory requirements and ensures the Group’s standards of business
reflect best practice
• Supports the Board in delivering strong, sustainable growth across its
business and supply chains, in global markets and covering all aspects
of the customer ecosystem
• Oversees and approves the terms of any transaction, arrangement
or agreement between the Propco Group and any Group company,
other than those in the ordinary course of business
• Ensures all such transactions, arrangements or agreements continue
to be in the best interests of the Company and its Shareholders
Supports the Board in fulfilling oversight responsibilities by reviewing
and monitoring:
• independence and effectiveness of internal/external audit functions
• integrity of financial and narrative statements
• internal financial controls and, as appropriate and in conjunction with the
Risk Committee, risk management framework
Assists Board in its oversight of risk, including:
• monitoring, management and mitigation of principal and emerging risks,
including definition and execution of risk management strategy and
associated risk policies
• advising on overall risk appetite, tolerance and strategy
• reviewing and monitoring robustness of the Group’s risk management
framework, policies and procedures when tested against risk strategy
and appetite
Audit Committee
Chair (interim): Dean Moore
Risk Committee
Chair: Gillian Kent
Remuneration Committee
Chair: Dean Moore
• Regularly reviews structure, size and composition of the Board
Committees and the Board, including the Board’s balance of skills,
knowledge, experience and diversity, to ensure membership remains
fit for purpose and the Group’s leadership needs are met
• Makes appropriate recommendations with regard to any Board
changes it considers necessary and identifies and nominates
candidates for Board approval
• Oversees plans for the orderly succession of appointments to Board
and Senior Management, ensuring appointments and succession plans
are based on merit and objective criteria and with due regard
to applicable D&I targets
• Sets remuneration policy for all Executive Directors
• Ensures remuneration policies and practices support strategy
and promote Group long-term success
• Approves design of, and determines targets for, any performance-related
pay schemes and determines policy and scope of pension arrangements
for Executive Directors
• Reviews and has regard to pay and employment conditions across the
Group and considers any major changes in employee benefit structures
Nomination Committee
Chair: Charles Allen
In addition to addressing the standard items of business
detailed within the aforementioned Schedule of Matters,
the Board also considered a number of other matters
during 2022 including (but not limited to):
• Corporate activity and Group structure: overseeing
the completion of the internal Divisional reorganisation
(including the subsequent hypercare process)
resulting in a simplified Group structure and providing
material optionality and flexibility to enter into
future strategic partnerships and generate value
accretion for stakeholders; detailed consideration
of indicative third-party proposals for the Group
and unanimously concluding that such proposals
significantly undervalued the Group and its future
prospects and should therefore be rejected; and
overseeing the mutual termination of the option and
collaboration agreement with Softbank in light of
global macroeconomic conditions.
• Governance: ongoing review of certain corporate
governance arrangements including a continued focus
on preparing to step up to the Premium Segment of
the London Stock Exchange’s Main Market at the
appropriate time, with timing subject to the outcome
of the FCA’s ongoing review vis-a-vis reform of the
current listing regime; further to the Nomination
Committee’s recommendations, considering and
approving the appointment of Damian Sanders as
CFO, John Gallemore as COO and three independent
NEDs, including the Independent Chair, to the Board;
and, as previously detailed, considering the format and
content of Board meetings/packs to ensure enhanced
Board effectiveness, together with implementation of
an annual Board planning cycle incorporating monthly
deep dives and certain key Board activities.
• Strategy: ongoing consideration of the Group’s
strategic aims and objectives in light of the challenging
macroeconomic backdrop including: (i) regularly
reviewing the impact of inflationary pressures, elevated
commodity pricing, FX headwinds and ongoing supply
chain issues (and in conjunction with the general
risk management approach); and (ii) focusing on the
Group’s growth strategy across a number of large
global sectors, anticipated to deliver long-term value for
Shareholders and ensure the Group remains on track to
be cash flow positive in 2024.
• General: against the backdrop of a number of global
factors, including the war in Ukraine, Covid-19 related
lockdowns in Asia and unprecedented inflationary
pressures, ongoing oversight of market guidance
and consensus and the Group’s profit improvement
initiatives; and considering and approving a new
£156m banking facility, provided equally by three
existing lenders.
Further information on the key discussions and principal
decisions taken by the Board during the 2022 reporting
period, including stakeholder considerations, can be found
in the “Section 172 Statement Stakeholder Engagement”
section of the Strategic Report on pages 47-54.
Chair: Charles Allen
Provides effective leadership and promotes the long-term, sustainable success of the Company and the Group,
whilst setting and overseeing the successful delivery of strategic aims and objectives
Board
The governance structure within the Group at the end of the 2022 financial
year, and as at the date of this Governance Report, is as follows:
Board Committees
and governance structure
Pursuant to the Schedule of Reserved Matters previously
referred to, the Board is authorised to establish the Board
Committees which, through the delegation of authority
narrated within their Terms of Reference, support the Board
in the proper and effective discharge of its duties and
responsibilities.
Accordingly, to ensure the most robust governance
structure exists within the Group to comprehensively
support the Board and promote long-term, sustainable
value creation for Shareholders, a Board-constituted
Nomination Committee, Audit Committee and
Remuneration Committee were established at the time of
Admission (in compliance with the Code), together with the
Related Party Committee, the Sustainability Committee and
the Risk Committee (the latter two being established during
2021). As detailed within the “Board evaluation” section of
the Nomination Committee Report on pages 133-137,
and in line with the Company’s ongoing PLC transition,
the scheduled monthly Board meeting agenda continued
to evolve during 2022 resulting in, amongst other things,
the inclusion of Board Committee updates as a standing
agenda item.
Further information on the composition and activities of
the Board Committees during 2022 can be found within
the respective Board Committee Reports on pages 123-157,
together with details of the membership changes which
took place to reflect outgoing and incoming NEDs. The
Nomination Committee was responsible for making
recommendations to the Board in respect of Board
Committee membership (where appropriate, following
consultation with the relevant Board Committee Chair)
and, in doing so, took into account not only the specific
skillsets and experience of individual NEDs but also the
time commitment expected of them and their external
commitments.
115 116
Annual Report 2022
Skills Leadership
Name
UK listed
PLC
Technology/
e-commerce
Marketing/
branding
Retail
industries
M&A
Global
operations
Governance
Finance &
accounting
Risk
management
Strategy &
development
Charles
Allen
x x x x x x x x x x
Matthew
Moulding
x x x x x x x x
John
Gallemore
x x x x x x x
Damian
Sanders
x x x x x x x
Edward
Koopman
x x x x x x
Iain
McDonald
x x x x x x x
Gillian
Kent
x x x x x x x x
Dean
Moore
x x x x x x x x
Board appointments,
recruitment and succession
Board composition is monitored on an ongoing basis to
ensure that the Directors, collectively, have the necessary
skillsets to effectively deliver the Group’s strategic aims
and objectives and the balance of skills, knowledge and
experience remains appropriate for a company of the size,
nature and stage of development of THG. Accordingly, and
as previously detailed within this Governance Report, Board
composition remained subject to scrutiny throughout 2022
(and up to the date of this Governance Report), with particular
consideration being given to overall independence and the
balance of Executive Directors / NEDs.
The need for an independent chair was recognised
pursuant to a review of corporate governance
arrangements and, following the Nomination Committee’s
recommendation, the Board considered and approved
the appointment of Charles Allen as Independent
Chair, effective from 22 March 2022. Subsequently,
and with a particular focus on the Independent Chair’s
mandate to refresh the Board and strengthen it by
improving its independence and diversity, Gillian Kent
and Dean Moore were appointed independent NEDs
on 15 September 2022. With both appointees bringing
extensive and relevant sector and PLC board experience,
and demonstrating strong track records in business
growth, these appointments were viewed as enhancing
not only the skillsets and experience on the Board but
also overall independence (noting that former SID Zillah
Byng-Thorne stepped down contemporaneously with
these appointments, together with non-independent NED
Andreas Hansson). Additionally, in January 2023 and as
considered further in the Nomination Committee Report
on pages 133-137, independent NED Damian Sanders was
appointed CFO and the incumbent CFO, John Gallemore,
appointed COO.
The following matrix sets out the key competencies
of individual Board members:
The process followed by the Nomination Committee in
recommending the three aforementioned Board appointees
is detailed within the Nomination Committee Report on
pages 133-137. As disclosed, appointments were made
on the basis of merit, with potential candidates assessed
against objective criteria, and with regard to the need to
promote diversity in the boardroom (including with respect
to gender, as reflected in Axon Moore’s search mandate
for suitable independent NEDs). Indeed, the breadth of
benefits which a diverse board can bring to a company,
including a more inclusive culture and improved corporate
governance generated via a broader insight/knowledge
base, are recognised and, as disclosed in the 2021 Annual
Report, the Board remains aligned with the FRC’s position
that, by reducing the risk of group think, diversity can
have a positive effect on the quality of decision-making
(Guidance on Board Effectiveness (July 2018)). Therefore,
in considering and recommending Board appointments,
the Nomination Committee seeks, as appropriate, to
promote, amongst other things, diversity of gender, ethnic
background and personal strengths to ensure Board
effectiveness is maximised through enhanced decision-
making which, in turn, results in enhanced value creation
for stakeholders.
Details of how potential Board appointees are identified
are also included within the Nomination Committee
Report and, as required by the Code, an independent
search consultant was formally appointed to assist with
the recruitment of an independent chair. Recruitment
consultancy firms may also be engaged to facilitate
a search for a particular position and, on occasion, the
Board and Senior Management may be asked for candidate
recommendations from within their professional networks.
Whilst the Nomination Committee remained cognisant
of the need to ensure the Company’s leadership was
appropriately structured to effectively oversee the delivery
and execution of the Group’s strategic aims and objectives
during 2022, it also gave due consideration to the skills and
experience that might be required to effectively address
and manage upcoming challenges and opportunities.
Additionally, in considering the balance of skills, knowledge
and experience on the Board (and the Board Committees),
a related responsibility of the Nomination Committee was
to ensure appropriate succession planning was undertaken
from a Board and Senior Management perspective to
satisfy any potential leadership needs that could arise
both in the short and the medium to long term.
118
117
Annual Report 2022
Board induction,
training and support
Throughout 2022 the Company continued to
develop and refine its Board induction and training
arrangements to ensure all Directors possess and/or
acquire the requisite market and operational knowledge
to oversee the successful delivery of the Group’s strategy.
A structured onboarding programme is now in place for
all new Board members which includes both internal
briefing memorandums on core regulatory and legislative
items (such as the UK Market Abuse Regulation, inside
information and insider dealing) and face-to-face/
interactive training and update sessions with relevant
external advisers (e.g. legal and remuneration) to ensure
Directors are fully aware of the duties and responsibilities
incumbent upon them as PLC directors and Board
Committee members. Whilst one-to-one sessions are
typically arranged with members of Senior Management
to provide new Board members with a general introduction
to all areas of the business, more focused/tailored sessions
may also be arranged when, for example, a Director has
a particular area of interest or wishes further insight/data
on certain Group and/or Divisional items.
Following the induction process, the continuing
professional development needs of the Board (both
collective and individual) remain subject to ongoing
oversight and a number of measures are now in place to
keep Directors suitably apprised of applicable legislation,
guidance and market practice/developments and any
changes to, and/or proposals on, the corporate governance
landscape. In addition to the Company’s legal advisers
attending scheduled Board meetings to run condensed
training sessions on topics such as the FCA’s proposed
audit and governance reforms, the selective disclosure of
inside information and the new climate/TCFD and diversity
reporting requirements, associated briefing papers are
also included within Board packs for Directors’ longer-
term information/reference. As previously disclosed, the
new annual Board planning cycle has introduced regular
deep dives which ensure that NEDs are kept up to date
on key Group and Divisional items, including operational
issues, market challenges and landscape, and People and
Sustainability matters, with broker and investor updates
incorporated as appropriate.
The Company has arranged membership of the Non-
Executive Directors’ Association for all Board members
(including Executive Directors) to ensure individual
knowledge and skillsets are suitably refreshed and via
which Directors are provided with technical knowledge
updates and have access to a monthly programme of
seminars and briefings (including networking opportunities).
The Company is fully supportive of Directors attending any
such events which may be of interest and/or which address
particular training needs.
THG remains committed to ensuring that the necessary
resources are available to the Board and Board Committees
to allow them to function effectively and efficiently and,
more generally, that the Group’s corporate governance
framework is appropriately structured to meet both its
immediate and longer-term needs. The Company Secretary
plays a key role in this regard, advising on legal, regulatory
and governance matters and ensuring they are available to
advise/assist Directors as and when required.
Board independence
The Board currently comprises three Executive Directors
(i.e. the CEO, the CFO and the COO) and five NEDs,
three of whom (including the Chair) are deemed to be
independent in character and judgement following due
consideration of their individual circumstances against
Code Provision 10. Further to a critical appraisal of the issue
by the Board and as previously disclosed in, for example,
the 2021 Annual Report, the holding of Ordinary Shares
by NEDs is not considered to impair their independence
but, rather, is viewed as aligning their interests with those
of Shareholders more generally and thus with the long-
term interests and success of the Company. Consequently,
NEDs may purchase Ordinary Shares at market value via a
broker and facilitated by the Company if required. Directors’
shareholdings are set out on page 151 of the Directors’
Remuneration Report.
Upon analysis of the relevant Code provisions, Edward
Koopman is not deemed to be independent, having been
appointed to the Board prior to Admission to represent
Sofina Capital S.A. (“Sofina”), a major Shareholder. Edward
Koopman is both an employee of Sofina and a member of
its Executive Committee, although it should be highlighted
that, whilst Sofina continued to hold Ordinary Shares
following Admission, his continued directorship is not in
a Shareholder-representative capacity. Iain McDonald is
also not regarded as independent, with reference to the
tenure provisions of the Code and noting that he was
appointed to the Board prior to Admission in 2010.
At the end of the 2022 reporting period the Board
comprised two Executive Directors and six NEDs, four
of whom were regarded as independent – namely, Charles
Allen, Damian Sanders, Gillian Kent and Dean Moore. On
an analysis which incorporates the strict letter of the Code
and excludes the Independent Chair, the Code Provision
11 requirement that at least half the Board be independent
NEDs was not satisfied at the financial year end.
As discussed in further detail in the Nomination Committee
Report on pages 133-137, and in light of the Chair’s express
mandate to refresh and strengthen the Board by improving
independence and diversity, Board composition will remain
a key focus throughout 2023, and with particular regard
to overall independence and the balance of Executive
Directors / NEDs.
Conflicts of interest
and time commitment
Whilst the Directors have a statutory duty to avoid
situations where they have, or can have, an interest that
conflicts, or may possibly conflict, with the Company’s
interests, and must declare the nature and extent of any
such interest, the Articles of Association permit non-
conflicted Directors to authorise any such conflict, on such
terms and conditions as they think fit. A conflict of interest
situation which arose during 2022 related to the Board’s
consideration of the unsolicited, indicative, non-binding
proposal received for the entire issued share capital of the
Company from a consortium led by Belerion Capital Group
Limited (“Belerion”) and King Street Capital Management
L.P.. NED Iain McDonald is the founder and chief
investment officer of Belerion and, as such, a clear conflict
of interest was determined to exist which required that Iain
McDonald was not present during any Board discussions
relating, directly or indirectly, to the proposal or any other
proposals received by the Company.
The NEDs’ Letters of Appointment (“Appointment Letters”)
recognise that NEDs may have business interests outwith
those of the Company but require that no NED puts
themselves in a position where their duties to any other
person, firm or company conflict with their duties to the
Company or the wider Group. The Appointment Letters
further require that any actual or potential conflict of
interest must be communicated to the Board as soon as
it becomes apparent, and at least seven days’ written notice
must be provided to the Chair before a NED accepts an
appointment as a director, agent, employee or consultant of
any company or firm engaged in a business competing with,
or similar to that of, the Company or any Group company.
The Group occupies and utilises property assets which
are owned by the Propco Group, which itself is wholly
owned by the CEO (who is also a major Shareholder).
As a result of these arrangements, the Board-constituted
Related Party Committee was established post-Admission
to oversee and approve Related Party Transactions and
provide the requisite governance structure within which any
actual or potential conflicts of interest could be considered
and addressed. Whilst officers of the Propco Group were
also previously officers of the Company, this situation has
been rectified to avoid any perceived or actual conflicts of
interest arising. Further information on the responsibilities
and activities of the Related Party Committee can be found
in the Related Party Committee Report on pages 138-140.
The time commitment expected of, and expended by, NEDs
is kept under ongoing review by the Board, in conjunction
with the Nomination Committee. Under the terms of their
Appointment Letters and pursuant to Code Principle H,
NEDs must confirm they have sufficient time to undertake
the duties and responsibilities incumbent upon them and
have disclosed details of all other significant business (and
other) interests and a broad indication of the time required
for such commitments. The Board must be kept advised
of any subsequent changes to such commitments (and of
any new commitments that may have implications on a
NED’s ability to commit sufficient time to their role) and,
again, at least seven days’ written notice must be provided
to the Chair before a NED accepts any external additional
commitments which may impact the time they are able
to commit to their Board role. In addition to attending
standard Company meetings (including Board meetings,
Board Committee meetings and the Company’s annual
general meeting), NEDs are expected to devote sufficient
time to appropriate preparation ahead of such meetings
and, generally, to commit additional time to their role as
circumstances require (and particularly when the Company
is undergoing a period of increased activity).
At the date of this Governance Report the Board is satisfied
that the current external commitments of its NEDs, as
detailed within their biographies on pages 108-110, do not
compromise their effectiveness or performance.
Workforce engagement and D&I
As a People-led organisation THG recognises the
importance of robust and consistent workforce
engagement to ensure the Board understands, and
appropriately considers and addresses, the most salient
employee issues and concerns. Falling within the
scope of the 2030 Sustainability Strategy, the subject
of employee engagement was a combined key focus
of the Sustainability Committee and the People
team during 2022 (and remains so in 2023), and
engagement mechanisms were kept under ongoing
review and update to ensure they remained effective
and appropriate for a company of the nature and
scale of THG (as required by the Code). Whilst further
information on engagement measures and progress can
be found in the “Empowering people and communities”
section of the Strategic Report on pages 71-73, key
initiatives included the ‘b-Heard Survey’ which was run
by a workforce engagement specialist and provided
employees globally with the opportunity to feed back
on all aspects of their working life, from their personal
growth and wellbeing through to leadership and
management items. The Survey responses are currently
being assessed to help identify those areas where the
Group excels, whilst highlighting engagement challenges
and opportunities for improvement; the feedback from
UK-based employees will contribute to THG’s 2023
‘Best Companies’ accreditation submission.
With reference to Code Provision 5, the Board considers
that effective arrangements are in place in respect of
workforce engagement which ensure clear and transparent
lines of communication exist between the workforce,
Senior Management and the Board. As detailed in the
preceding “Board Committees and governance structure”
section of this Governance Report, the inclusion of
119 120
Annual Report 2022
Board Committee updates was introduced as a
standing agenda item at monthly Board meetings
during 2022, in turn ensuring the Board is kept suitably
apprised of employee engagement initiatives via the
NED Sustainability Committee Chair. Additionally, a
People section is incorporated within monthly Board
packs and the non-statutory Group Talent Director,
who has ultimate oversight of the Group’s workforce
engagement initiatives, is also in attendance at monthly
Board meetings to take questions and report to the
Board on the wider People piece. On a day-to-day
basis the Group’s D&I Committee Champions play
a key engagement role, driving general workforce
engagement and representation within their Divisions
whilst collaborating with, and reporting into, Senior
Management. This reporting framework ensures the
‘employee voice’ is heard at an appropriately senior level
within the Group and, as Senior Management typically
attends the monthly Board meetings, this further
facilitates regular updates and feedback being shared
directly with the Board.
In placing its People at the heart of the organisation
THG considers that a truly engaged and empowered
workforce will result in an enhanced workplace culture,
in turn serving to enhance operational resilience
and growth. It has recently been agreed that the
Group’s employee engagement strategy, including
implementation thereof, should become a recurring
agenda item for the Remuneration Committee which,
it is considered, evidences how seriously the Company
and the Board view their responsibilities in respect of
workforce engagement.
Further details on how engagement strategies positively
impact decision-making throughout the organisation,
including at Board level, can be found in the “Section
172 Statement Stakeholder Engagement” section of the
Strategic Report on pages 47-54.
‘Empowering People and Communities’ is one of the
three key priorities under the 2030 Sustainability
Strategy, THG x Planet Earth, which affirms that
THG’s greatest asset is its People. Indeed, the 2030
Sustainability Strategy recognises that to bring out
the best in its People the Group must foster a diverse
and inclusive environment to ensure its People feel
empowered to make a positive difference in the world.
D&I represents another key focus area for the Board
and during 2022 a Board-approved D&I Strategy was
launched which seeks to enhance THG’s meritocratic
culture by building upon the Group’s approach to
inclusion and diversity at every level within, and every
location across, the organisation.
The Group’s D&I vision is to further curate a diverse,
inclusive and supportive work environment - reflective
of the communities within which THG operates and
comprising talented and motivated individuals - and it is
considered that this updated D&I Strategy provides clear
direction for achieving this vision. Further information
on the Group’s approach to D&I-related matters,
together with details on how the Group supports the
wellbeing and development of its workforce, can be
found in the “Empowering people and communities”
and “Our people” sections of the Strategic Report.
The “Our people” section also includes key D&I data
required to be disclosed pursuant to section 414C
of the Companies Act.
Board evaluation
Building on the results of the previous Board evaluation
which was discussed in the 2021 Annual Report (the
“2021 Evaluation”), the Company’s second Board
evaluation took place at the end of 2022. As before,
the Company engaged a third-party market leader within
the advanced digital evaluation space and used their
online platform to run the evaluation which was aligned
with best market practice and the content tailored, as
appropriate, to the specific requirements of the Company.
As required by the Code, the evaluation considered
not only the effectiveness of individual Directors but
also the collective effectiveness of the Board and
Board Committees, including specific consideration of,
for example, composition and diversity. Certain of the
outputs and actions flowing from the evaluation are
detailed within the Nomination Committee Report on
pages 133-137, together with insights on progress against
the 2021 Evaluation. Significantly, the overall conclusion
was that the Board and the Board Committees continue
to function in an effective manner and each Director
continues to contribute effectively to the Board and the
Board Committees of which they are a member.
As previously disclosed, and in furtherance of good
corporate governance, the Company has committed to
undertaking an externally facilitated Board evaluation
within three years of Admission (i.e. by September 2023)
and at least every three years thereafter, albeit this
Code requirement is only strictly applicable to FTSE 350
companies. The Company’s first external evaluation will
therefore take place later this year.
ESG
As detailed within the “Sustainability” section of
the Strategic Report and as set out within the 2030
Sustainability Strategy, the Group’s sustainability vision
is to act as a force for good and leave the world a better
place by using THG’s scale, partnerships, access to
capital and unique capacity for innovation to promote
and embed sustainability into everything the Group
does. In seeking to discharge its primary responsibility
under Section 172, the Board therefore not only takes
into account what may be in the best interests of
Shareholders but, recognising the responsibility which
THG owes to all its stakeholders (and with particular
regard to its commitment to act as a force for good),
also gives the appropriate consideration to wider
stakeholder issues (further information on which can
be found in the “Section 172 Statement Stakeholder
Engagement” section of the Strategic Report on
pages 47-54). Indeed, through striving to deliver on
THG’s purpose and strategic priorities, the Board aims
to generate long-term, sustainable growth and, in turn,
secure positive change for all THG stakeholders across
the locations and communities within which it operates.
Evidencing THG’s commitment to embed sustainability
best practice at the heart of the business, Executive
Directors and Senior Management have been set
relevant sustainability-linked objectives from 2022
onwards, with an increased focus in personal reviews
on sustainability-related, and not simply commercial,
outcomes. However, to ensure that the appropriate
foundations are in place for the Group to achieve its
vision and deliver effectively on THG x Planet Earth,
a Board-approved Social Impact Strategy was developed,
with employee input, during the 2022 reporting period.
This Strategy will be rolled-out during 2023 and is
focused on maximizing THG’s impact on, and addressing
social issues within, its local and global communities; it
comprises three pillars – namely, championing inclusion,
disrupting inequality and creating opportunities – each
with defined areas of focus which, collectively, ensure
THG’s social impact is targeted on a group-wide basis.
The launch of the Social Impact Strategy, details on
which can be found within the “Our people” section
of the Strategic Report on pages 74-78, is considered
to further demonstrate THG’s social conscience and
underline its robust commitment to act as a force for
good and seek to create a better, more sustainable
future for all.
122
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Annual Report 2022
Audit Committee Report
Dean Moore
Interim Chair of the Audit Committee
Having been appointed interim Audit Committee Chair on
24 January 2023, I have the pleasure of introducing the Audit
Committee Report for the 2022 financial year and confirm
that, during the year, and up to the date of this Report, the
Committee has continued to discharge a key role within the
Group’s corporate governance infrastructure.
The ongoing development of the Group’s internal controls
systems (financial and otherwise) and general control
environment (including the Internal Audit function) remained
subject to rigorous oversight and, where appropriate,
challenge by the Committee during 2022 to ensure their
continued effectiveness and integrity.
It is pleasing to report that, as confirmed by the annual
Board and Board Committees’ evaluation, the Committee
continues to operate effectively and deliver against its Terms
of Reference. Further details on this evaluation, including
the means by which it was conducted, can be found in
the “Board evaluation” section of the Governance Report.
Composition and meetings
Pursuant to its Terms of Reference, members of the
Audit Committee are appointed by the Board, upon the
recommendation of the Nomination Committee and
in consultation with myself as Audit Committee Chair.
Individually members are expected to possess the skills and
experience appropriate for Audit Committee membership,
whilst collectively the Committee must have the necessary
competence (financial and otherwise) relevant to the sectors
in which the Company operates. The Terms of Reference
stipulate that the Committee must comprise at least three
independent NEDs, one of whom is, where possible,
a member of the Remuneration Committee (possessing
recent and relevant financial expertise and experience in
accounting and/or auditing (as determined by the Board))
and one of whom is a member of the Risk Committee.
At the end of the 2022 reporting period, Audit Committee
membership satisfied the relevant provisions of both the
Terms of Reference and the Code comprising
Damian Sanders, as Audit Committee Chair, Gillian
Kent, an independent NED and Risk Committee Chair,
and myself, Dean Moore, also an independent NED and
Remuneration Committee Chair. As previously detailed,
Gillian Kent and I became members of the Audit Committee
upon our appointment to the Board on 15 September
2022, when Zillah Byng-Thorne stepped down from the
Board and certain Board Committees (including the Audit
Committee). Dominic Murphy was also a member of the
Audit Committee during the 2022 reporting period until
he stepped down from the Board on 8 June 2022.
Upon his appointment to the position of CFO on 24 January
2023 Damian Sanders stepped down as Audit Committee
Chair, and from all other Board Committee membership, at
which time I was appointed Audit Committee Chair on an
interim basis. As the Board currently comprises only two
independent NEDs, Gillian Kent and myself (excluding the
Chair), this has resulted in the non-satisfaction of the Audit
Committee membership requirements since this date. This
position is temporary and expected only to continue until
the appointment of at least one new independent NED in
the coming months which will ensure that the applicable
membership requirements are satisfied.
Whilst at least four Audit Committee meetings must take
place annually, at appropriate times in the financial reporting
and audit cycle (and as otherwise required), six Committee
meetings took place during 2022, reflecting the Committee’s
valuable role within THG’s governance framework. Member
attendance at these meetings is set out within the preceding
table and, although attendance is restricted to Committee
members (and any individual entitled to be present as
an observer), the Terms of Reference provide that certain
individuals (including the CFO, the Head of Internal Audit
and the External Auditor’s Lead Partner) shall be invited
and are expected to attend meetings on a regular basis and
may also request a meeting of the Committee should they
consider it necessary or desirable to do so. Outside these
scheduled meetings and throughout the 2022 reporting
period (and up to the date of this Report), the Audit
Committee Chair (and other Committee members where
appropriate) also maintained an ongoing dialogue with the
principal individuals involved in the Group’s governance,
including the Independent Chair, the CEO, the CFO, the
Deputy CFO, the Head of Internal Audit and the External
Auditor’s Lead Partner.
In addition to attending all Audit Committee meetings,
the External Auditor met with Audit Committee members
in the absence of Senior Management and also privately
with the Audit Committee Chair, as and when considered
necessary, to discuss the scope of the audit plan, the remit
of the external audit and to challenge, as they saw fit, the
findings of the audit process, including (but not limited to)
any material issues which had been identified, areas of
significant judgement and the general effectiveness of
the process.
Role and responsibilities
The Audit Committee’s Terms of Reference clarify that its
purpose is to support the Board in fulfilling its oversight
responsibilities by reviewing and monitoring: the
independence and effectiveness of internal and external
audit functions; the integrity of the Group’s financial and
narrative statements; and the Group’s internal financial and
non-financial controls and, as appropriate and in conjunction
with the Risk Committee, risk management framework.
The specific duties and responsibilities are detailed therein
and include, but are not limited to, the following:
• monitoring the integrity of the Group’s financial statements,
including its half-year financial statements, annual report
and accounts and preliminary announcements, and
reviewing and reporting to the Board on significant financial
reporting issues and judgements which those statements
contain, having regard to matters communicated to it by the
External Auditor;
• where requested by the Board, reviewing the content of
the annual report and accounts and the interim financial
statements and advising the Board on whether, when taken
as a whole, each are fair, balanced and understandable
and provide the information necessary for Shareholders
to assess the Company’s performance, business model
and strategy;
• assisting the Board with monitoring and reviewing the
Group’s internal control systems on an ongoing basis,
including monitoring material financial, operational and
compliance controls;
• monitoring and assessing the role and effectiveness of the
Internal Audit function in the overall context of the Group’s
risk management system and the work of the Compliance
and Finance functions;
• monitoring the independence, quality and effectiveness
of the external audit process; and
• reviewing the Group’s procedures for preventing and
detecting fraud, its systems and controls for the prevention
of bribery and the adequacy and effectiveness of its
anti-money laundering systems and controls.
"The Committee, together with the Risk Committee, continues to
play a leading role in ensuring the integrity of the Group’s financial
reporting, overseeing external and internal audit functions and
monitoring the Group’s controls framework. In light of proposed
corporate governance reforms, the ongoing evolution of THG’s
controls environment and oversight from the Committee remain key."
Members and attendance
1. Dean Moore was appointed as a member of the Audit Committee upon his appointment to the Board on 15 September 2022. He thereafter assumed the
position of Audit Committee Chair on an interim basis on 24 January 2023 when Damian Sanders stepped down from the Committee upon his appointment
as an Executive Director.
2. Gillian Kent was appointed as a member of the Audit Committee upon her appointment to the Board on 15 September 2022.
3. Damian Sanders stepped down as Audit Committee Chair upon his appointment as an Executive Director on 24 January 2023 and was replaced by Dean
Moore, a member of the Committee, on an interim basis.
4. Zillah Byng-Thorne stepped down from the Board and as a member of the Audit Committee on 15 September 2022.
5. Dominic Murphy stepped down from the Board and as a member of the Audit Committee on 8 June 2022.
Committee member
Position Attendance
Dean Moore
Chair
1
1/1
Gillian Kent
Member
2
1/1
Damian Sanders
Former Chair
3
6/6
Zillah Byng-Thorne
Former Member
4
5/5
Dominic Murphy
Former Member
5
1/3
123 124
Annual Report 2022
Significant financial reporting areas
One of the roles of the Audit Committee is to assess
whether the judgements and estimates made by Senior
Management are reasonable and appropriate. In order
to assist in this evaluation, the finance team provided
accounting papers to the Audit Committee which
detailed the financial aspects surrounding key accounting
judgements and areas of focus for THG, including all
significant issues outlined in the following table. As part
of the year-end reporting process the Audit Committee
reviewed this Annual Report, the management papers
on key accounting estimates and judgements, going
concern and viability review, updates provided by the
External Auditor, accounting and reporting matters,
Area of focus Consideration and actions taken by the Audit Committee Impact on financial
information and
disclosure
Revenue
recognition
Following the growth of THG Ingenuity in recent years, the key areas of management
judgement include the classification of revenue streams to the Group’s Divisions and
contract accounting within Ingenuity Commerce. The Committee were presented with
the key judgements applied by management for the Ingenuity contracts under IFRS 15.
The Committee challenged management on the judgement relating to principal or agent
recognition of different revenue streams, being one of the key judgements. Management
responded to all challenges and there was no impact on the recognition or disclosure.
The revenue accounting
policy is included within
note 1c and note 2
within the Consolidated
Financial Statements.
Area of focus Consideration and actions taken by the Audit Committee Impact on financial
information and
disclosure
Accounting
for platform
development costs
As a growing technology business, THG incurred £56m in respect of additions to the platform in 2022.
The carrying value at 31 December 2022 totals £100m. There is management judgement applied regarding
which projects relate to capital spend. This is reviewed on a monthly basis with Senior Management across
Finance and Technology teams.
The Committee reviewed and assessed the accounting treatment and disclosure and the application of IAS
38. The effectiveness of controls around the maintenance and tracking of platform development projects
was also considered. Management is in the process of improving controls further in this area and plan to
present a plan to the Committee alongside working with the Internal & External auditors to adopt a controls-
based audit in this area in future years.
In addition, the Committee reviewed the level of spend and carrying values of the platform compared to
peers. It was noted that THG’s platform has a lower carrying value than its peers due to this being built in
house. All items were concluded to be appropriate.
Intangibles note 11
within the Consolidated
Financial Statements.
Impairment
and cash-
generating-units
Following the divisional reorganisation in the year, additional cash-generating-units (CGUs) have been
identified. The result is that six CGUs have been identified; THG Beauty; THG Nutrition; THG Ingenuity;
THG OnDemand; THG Luxury; and THG Experience. The Audit Committee reviewed management’s
conclusion of the number of CGUs in existence at the balance sheet date and agreed with the six units.
The Audit Committee reviewed management’s impairment paper in detail, challenged key judgements
including terminal growth rate, forecast growth rate and discount rates and concluded these to be
appropriate. The Committee reviewed the impairment charges recognised for THG Beauty and THG
Ingenuity and the judgements made thereon agreeing with management’s conclusion. The Committee
also approved the disclosure for inclusion within the financial statements.
The Intangible
assets note 11
is included within
the Consolidated
Financial Statements.
Presentation and
disclosure of
adjusted items
and APM’s
To allow the Committee to assess the policy, presentation and disclosure applied, Management presented
a detailed category by category analysis of adjusted items to the Committee in the year. The Committee
challenged the appropriateness of the classification of costs including those that were in relation to Covid-19.
The Committee also considered the presentation of APMs including Adjusted EBITDA from continuing
operations throughout this report and whether this enables a clear and fair understanding of performance.
The conclusion was that the adjusted items policy was appropriate and being applied consistently. The
Covid-19 costs that were incurred were trackable and often split separately on the face of the supplier
invoice. Management continues to review the level of these costs and do not anticipate the Covid-19 impact
to continue past H1 2023.
The Committee concluded that management had made clear announcements to the market in FY22
regarding the loss-making areas of the business under review and that showing an additional APM for those
categories that had been exited explained the impact of this to the users of the financial statements.
The Committee concluded that the use of APMs were satisfactory.
The adjusted items
note 4 is included
within the Consolidated
Financial Statements.
Related Party
Transactions
The Group leases a number of properties from a related party. A Related Party Committee is in place to
review and approve any transactions in the year.
The Audit Committee have reviewed the related party disclosure within the financial statements to ensure
this gives a true and fair view. This has included a review of whether there are any additional Related Parties
outside of those already identified due to Board appointments and shareholdings in the year.
Where relevant, detailed accounting papers were also shared with the Audit Committee during the year
for review.
The Audit Committee satisfied themselves that there were no additional related parties that had not
already been identified. The Audit Committee also approved the disclosure for inclusion within the financial
statements.
As noted in the 2021 Annual Report, officers of the Propco Group were also officers of the Company and
certain of its subsidiaries. Acknowledging the conflict of interest that may arise from such a position, the
decision was taken to resolve this crossover in officer appointments by 31 December 2022. The necessary
action was taken during the reporting period such that Propco Group officers are now fully independent of
the Group.
More details on related
parties are included
within the Related Parties
Committee Report.
The related parties’
details is included
within note 27 within
the Consolidated
Financial Statements.
Taskforce on
Climate-Related
Financial
Disclosures
A significant change to the annual report and accounts in 2022 is the inclusion of
TCFD. During 2022, THG formed a TCFD governance structure and process to support
compliance and disclosure. Regular updates were shared with the Committee.
In addition, the proposed disclosure was reviewed and approved by the Committee.
Task Force on
Climate-related
Financial Disclosures
(TCFD) section.
The previous table is not a complete list of all the Group’s accounting issues, judgements, estimates and
policies, but highlights the most significant ones for the period in the opinion of the Audit Committee.
Topic Activity / Review
Financial reporting • Reviewed the draft and final half-year statement, including key accounting judgements, materiality and the External
Auditor’s report on the interim statements
• Reviewed key judgements and estimates in preparation for year-end reporting
• Reviewed year-end matters including the draft Annual Report and Accounts (and assessed the processes which ensure it
is fair, balanced and understandable), significant accounting judgements, the draft and final full-year results announcement,
the going concern statement and the viability model
• Considered the impact of climate risks on the financial statements
• Review other reports and updates from management including the Group Tax Strategy, Corporate Reporting Reform, and
updates from the AQR Inspection Report
External audit • Reviewed EY’s plan for the audit of the 2022 Annual Report and Accounts and the progress of the audit to date
• Reviewed EY’s report on the scope of the audit of the 2022 Annual Report and Accounts, including key audit risks
• Disclosed relevant audit information to the External Auditors and the required evidence in support of it
• Reviewed the final report from EY following completion of the audit of the 2022 annual report
Internal control and
assurance
• Reviewed reports from Internal Audit on assurance and audit work
• Reviewed other updates from Internal Audit including the Recommendations Tracker and Whistleblowing Updates
• Re-approved the Internal Audit annual plan on a quarterly basis
• Reviewed the outputs of the fraud risk assessment
Activities of the Audit Committee
As noted above, six Audit Committee meetings were convened during the 2022 reporting period, all of which
were scheduled. The main matters that the Audit Committee considered during the year are listed below:
and management representation letters concerning
accounting and reporting matters. The Audit Committee
assessed whether suitable accounting policies had been
adopted and the reasonableness of the judgements and
estimates that had been made by Management. This
section outlines those significant issues which received
particular focus from the Audit Committee in relation to
the financial statements for the period and how these
issues were addressed.
Significant issues which arose during the reporting
period were dealt with as follows:
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Annual Report 2022
Fair, balanced and
understandable assessment
At the request of the Board and pursuant to its Terms of
Reference, the Audit Committee has considered whether,
in its opinion and when taken as a whole, the Annual
Report is fair, balanced and understandable and provides
the information necessary for Shareholders to assess THG’s
position and performance, business model and strategy.
THG has established internal controls in relation to the process
for preparing the Annual Report including the following:
• Senior Management regularly monitors and considers
developments in accounting regulations and financial
reporting and, where appropriate, reflects developments
in the financial statements.
• The document is drafted by Senior Management with
overall coordination by a member of the Finance Team
and additional support from external advisers to ensure
consistency across the relevant sections and that the
necessary information is included for shareholders to
assess the Group’s position and performance, business
model and strategy.
• Comprehensive reviews of drafts of the document are
undertaken by Executive Directors, Senior Management
and external advisers as part of an internal verification
process which is undertaken to ensure accuracy and
to assess whether the document is fair, balanced and
understandable.
• The final draft of the document is reviewed by the Audit
Committee prior to consideration by the Board.
Following its review, the Audit Committee advised the
Board that the Annual Report was, when taken as a whole,
considered to be fair, balanced and understandable and
provided the information necessary for Shareholders to
assess THG’s position and performance, business model
and strategy. The Audit Committee was also satisfied
that suitable accounting policies have been adopted and
appropriate disclosures made in the financial statements.
The Viability and Going Concern Statements are set out
on pages 93-95 of the Strategic Report.
Risk management and
internal controls
In accordance with the Code ultimate responsibility for the
Group’s systems of internal controls and risk management
framework rests with the Board. However, pursuant to
the provisions of the Code and as reflected in its Terms of
Reference, the Audit Committee has delegated responsibility
for the ongoing monitoring and review of the Group’s internal
control systems, including its financial, operational and
compliance controls, while assisting the Board in its annual
review of the effectiveness of these systems and determining
their adequacy (or otherwise).
During the year, the Committee considered the UK
Government’s consultation on ‘Restoring Trust in Audit
and Corporate Governance’ and reviewed management’s
strategy for delivering the necessary control framework
enhancements.
The Audit Committee continues to work in support of the
Board’s risk management strategy and in conjunction with
the Risk Committee as and when it is considered appropriate
to do so. Information on the Group’s risk management
framework can be found on pages 83-86 of the Strategic
Report, together with details of the processes and controls
which were in place throughout the reporting period to
manage and mitigate risk and provide the Board with the
required assurance that sound systems of risk management
and internal controls exist throughout the Group.
Internal Audit
The Audit Committee is responsible for reviewing and
approving the role and mandate of the Internal Audit
function while monitoring and assessing the effectiveness
of its work, including in the overall context of the Group’s
risk management systems. To ensure the reporting
line of the Internal Audit function is independent of the
Executive Leadership Team and is suitably positioned
to exercise independent judgement, it has access to the
Audit Committee as and when necessary, and the Head
of Internal Audit has a direct reporting line into the Audit
Committee Chair. Further, the Audit Committee regularly
meets with the Head of Internal Audit, in the absence
of Senior Management, to discuss the effectiveness of
the function and to consider the actions taken by Senior
Management to implement its recommendations and
support its workings.
Internal Audit plans include a range of financial and
non-financial engagements, delivered in an assurance or
advisory capacity. The Internal Audit plan is risk-based
and due consideration is given to each of the following
areas during the planning process; principal risks; key
divisions and central functions; cyber; ESG; projects and
M&A; global site audits; operations and commerce. Audit
engagements were undertaken in each of these areas
during 2022.
The annual internal audit plan is subject to detailed review
by the Audit Committee to ensure alignment with key
business needs; regular progress updates are provided to
the Committee which oversees and approves the scope of
the internal audit plan on a quarterly basis. Following due
and careful consideration of all relevant factors, the Audit
Committee is satisfied that the Internal Audit function is
equipped to properly and effectively discharge its duties
and responsibilities in accordance with the relevant
professional standards for internal auditors and that the
internal audit plan itself provides appropriate assurances
in respect of the financial and non-financial controls in
place to manage and mitigate the principal and emerging
risks facing the business (further details of which can be
found on pages 87-93).
Independence, performance and
effectiveness of External Auditor
The External Auditor confirmed its independence and
objectivity from THG during the 2022 reporting period and
both the Audit Committee and the Board are satisfied that
the External Auditor has adequate policies and safeguards
in place to ensure its objectivity and independence is
maintained. When assessing the independence of the
External Auditor, the Audit Committee considered, amongst
other things, the value of non-audit fees provided by the
External Auditor, the relationship with the External Auditor
as a whole and the annual disclosure from the External
Auditor to discuss the threats to its independence and the
safeguards applied to mitigate those threats.
In overseeing the External Auditor relationship,
the Audit Committee is responsible for making formal
recommendations to the Board on its appointment,
reappointment and removal, and in this regard seeks
views from Senior Management on the quality and
effectiveness of the external audit process.
The effectiveness of the Lead Partner, the audit team, their
approach to audits, including planning and execution,
communication, support and value were assessed and
discussed, and consideration given to whether the External
Auditor had achieved the agreed audit plan or otherwise
explained the reasons for any departures from it, including
any changes in perceived audit risks and the work
undertaken by the External Auditor to address those risks.
The content of the External Auditor’s Board report
was also reviewed and monitored, together with other
communications with the Audit Committee, in order to
assess whether there was a good understanding of THG’s
business, and establish whether recommendations had
been acted upon and, if not, the reasons why. As part of the
assessment of the External Auditor, the Audit Committee
considered whether it had exercised professional
skepticism and an appropriate degree of challenge to
Senior Management, particularly on key accounting and
audit judgements.
Additional feedback was sought from various participants in
the process (primarily the Audit Committee itself, the CFO,
the Chair and CEO).
Overall, the effectiveness of the external audit process was
assessed as performing as expected. The Audit Committee
concluded it was satisfied with the work undertaken by the
External Auditor, including adequate levels of challenge,
during the reporting period.
There are independent reporting lines from the External
Auditor to the Committee and the External Auditor is
afforded the opportunity for sessions with the committee
throughout the year.
The Audit Committee is also responsible for considering
and approving the terms of engagement and remuneration
of the External Auditor for both audit and non-audit
services, and removal of the External Auditor. A resolution
to propose the re-appointment of EY was approved by
Shareholders at the 2022 AGM. When considering whether
to recommend the reappointment of the External Auditor,
the Committee considers a range of factors, including
the effectiveness of the external audit, the period since
the last audit tender was conducted, and the ongoing
independence and objectivity of the External Auditor.
The lead audit partner, Karl Havers, has been in post since
the start of the audit for the 2021 reporting period. Whilst
the Audit Committee is aware that the initial engagement
period for a statutory auditor should not exceed 10 years,
the Company tenure is counted from 1 January 2021 (the
first accounting period audited following Admission). The
Audit Committee considers that it would be appropriate
to conduct an external audit tender by no later than 2030.
The External Auditor has been appointed since the 2011
reporting period to the date of this Annual Report.
Fees payable to the External Auditor
The Audit Committee has reviewed and approved a policy
regarding non-audit work and fees, in relation to which
please see Note 5 of the Group’s financial statements.
In order to ensure that the provision of non-audit services
does not impair the External Auditor’s independence or
objectivity, this policy requires that the Audit Committee
pre-authorises any non-audit work proposed to be
undertaken by the External Auditor or, if required
urgently between meetings, the Chair of the Audit
Committee is empowered to provide such authorisation.
There are certain services which cannot be provided
by the External Auditor or members of its network without
the possibility of its independence being compromised;
it is not therefore permissible for the External Auditor to
provide such services. Non-audit services prohibited under
independence requirements will not be authorised.
The only non-audit services performed in the year related
to the interim procedures in accordance with International
Standard for Review Engagements (UK and Ireland) 2410.
The total fees were £0.1m being a 1:23 ratio to the audit
fee. It is widely accepted that such procedures would be
completed by the Group’s auditor. The Committee have
therefore concluded the objectivity and independence
of the external auditor is safeguarded.
127 128
Annual Report 2022
On behalf of the Audit Committee
Dean Moore
Interim Chair of the Audit Committee
17 April 2023
Risk Committee Report
Members and attendance
Committee member Position Attendance
Gillian Kent Chair¹ 2/2
Dean Moore Member² n/a
Damian Sanders Former Member
3
4/4
Zillah Byng-Thorne Former Chair¹ 2/2
Dominic Murphy Former Member
4
0/1
“The Committee, together with the Audit Committee,
continues to play a key role in governing THG’s risk
management and internal controls. This oversight is
increasingly important, keeping pace with the dynamic
nature of change, both within THG and the external
economic environment. "
Having been appointed as Chair of the Risk Committee
upon joining the Board in September 2022, I am pleased
to introduce the Risk Committee Report for the financial
year ending 31 December 2022.
The Risk Committee was established to ensure an
appropriate framework exists within the Group for robust
and effective risk oversight and governance and this is
reflected within the Committee’s Terms of Reference which
align with current market practice (including in respect
of the Committee’s scope of responsibilities and duties).
The Committee, as confirmed by the annual Board and
Board Committees’ evaluation, continues to operate
effectively and deliver against its Terms of Reference.
Further details on this evaluation, including how it was
conducted, can be found in the “Board evaluation”
section of the Governance Report.
Focus for 2023
During the current financial year, the Audit Committee
will continue to:
• Oversee the controls and governance of any changes
in THG to ensure the continued effectiveness and
integrity of THG’s systems of internal controls and
development of THG’s Internal Audit function
as THG continues to grow and mature
• Play a key role in understanding the UK Government’s
‘Restoring Trust in Audit and Corporate Governance’
reforms when they are published and subsequently
monitoring the progress of the proposed control
framework enhancements
• Oversee the evolution of the organisation’s control
environment and the use of technology to enhance
the operation of controls and harness potential
opportunities to digitalise and automate controls
as the framework matures further
• Ensure the provision of training, development and
support is relevant to all Directors and the Executive
Leadership Team, particularly with respect to
applicable new legislation, regulation and guidance
Composition and meetings
As detailed within the Terms of Reference, members of
the Risk Committee are appointed by the Board, upon
the recommendation of the Nomination Committee and
in consultation with myself, as Risk Committee Chair.
The Terms of Reference provide that the Committee is
composed of at least three independent NEDs, one of
whom is a member of the Audit Committee, with the
quorum for any Committee meeting being any two of
its members. Whilst, collectively, the Risk Committee
must possess the necessary competence (risk, financial
and otherwise) relevant to the sectors in which the
Company operates, individual members are also
expected to have the requisite skills and experience
appropriate to such membership.
1. Zillah Byng-Thorne stepped down from the Board and as Risk Committee Chair on 15 September 2022 and was replaced by Gillian Kent who was
appointed to the Board with effect from this date.
2. Dean Moore was appointed as a member of the Risk Committee on 6 December 2022.
3. Damian Sanders stepped down as a member of the Risk Committee upon his appointment as an Executive Director on 24 January 2023.
4. Dominic Murphy stepped down from the Board and as a member of the Risk Committee on 8 June 2022.
Gillian Kent
Chair of the Risk Committee
130
129
Annual Report 2022
At the end of the 2022 reporting period, Committee
membership satisfied the relevant provisions of the Terms of
Reference comprising Gillian Kent, as Risk Committee Chair,
Damian Sanders, a former independent NED and former
Audit Committee Chair, and Dean Moore, also an independent
NED and Remuneration Committee Chair. As detailed above,
Gillian Kent became a member of the Committee upon her
appointment to the Board on 15 September 2022, replacing
Zillah Byng-Thorne as Committee Chair, and Dean Moore was
appointed to the Committee on 6 December 2022. Dominic
Murphy was also a member of the Committee during the 2022
reporting period until he stepped down from the Board on 8
June 2022. Upon his appointment to the position of CFO on 24
January 2023, Damian Sanders stepped down as a member
of the Risk Committee and from all other Board Committees.
As the Board currently comprises only two independent
NEDs, Gillian Kent and Dean Moore (excluding the Chair), this
has resulted in the non-satisfaction of the Risk Committee’s
membership requirements since this date. This position is
temporary and expected only to continue until the appointment
of at least one new independent NED in the coming
months which will ensure that the applicable membership
requirements are satisfied.
At least four Risk Committee meetings must be held annually,
at appropriate times in the financial reporting and audit cycle
(and as otherwise required), and any Risk Committee member,
the Chief Risk Officer (CRO) or the Head of Internal Audit
may request a meeting of the Committee if they consider
it necessary or desirable to do so. In accordance with the
Terms of Reference and as can be seen from the preceding
attendance table, four meetings of the Risk Committee took
place during the financial year under review, all of which were
scheduled. Whilst only members of the Committee (and any
individual entitled to be present as an observer) have the right
to attend Committee meetings, typically the CFO, Deputy CFO,
CRO and the Head of Internal Audit will also be in attendance,
together with the External Auditor.
Roles and responsibilities
The Risk Committee’s Terms of Reference detail the specific
duties and responsibilities of the Committee and clarify that
its purpose is to not only assist the Board in its oversight
of risk throughout the Group and advise on its overall risk
appetite, tolerance and strategy (including the principal and
emerging risks it may be willing to accept to achieve its
long-term strategic objectives) but to review and monitor:
• the principal risks and identify the emerging risks
facing the Group, the likelihood and impact of such
risks materialising and the way in which such risks
are managed and mitigated (including the definition
and execution of a risk management strategy and
associated risk policies); and
• the robustness of the Group’s risk management
framework, policies and procedures and their fitness
for purpose when tested against the Board’s risk
strategy and appetite.
As disclosed in the 2021 Annual Report, the Risk
Committee is also responsible for approving the role and
mandate of the Group Risk function and monitoring and
assessing the effectiveness of its work, including in the
overall context of the Group’s risk management systems.
The CRO has always open and direct access to the Risk
Committee, an arrangement which is viewed as key in
maintaining the independence of the CRO and Group Risk
reporting line from that of the Executive Leadership Team.
As required under the Terms of Reference, arrangements
are in place to ensure that the Risk Committee has
sufficient resources at its disposal to allow it to properly
and effectively discharge its duties and responsibilities
including, if considered appropriate, the ability to seek
specialist input and expertise from external advisors.
Activities of the Risk Committee
As detailed above, four Risk Committee meetings took
place during the reporting period and, as was the case
during the 2021 financial year, both Risk Committee Chairs
continued to meet with the CRO on a one-to-one basis
to discuss the ongoing development, refinement and
embedding of the Group’s risk management framework
and associated processes.
A summary of the key activities undertaken by the
Committee during the 2022 financial year is as follows:
• Received and challenged scheduled risk updates
outlining both the principal risks and any escalated
operational risks. The Committee also received detail
of escalated sub-risks as well as the outcome of
principal risk ‘deep dives’
• Consideration of the ongoing evolvement of group
and principal risk appetites and consideration of
emerging risks
• Consideration of the role of THG Insurance
in supporting risk mitigation activities
• Received and challenged the ongoing refresh of the
principal risks and their continuing relevance and
alignment to the business
• Review of the results and remedial actions arising
from the annual Fraud Risk Assessment and any
summary reports of escalated incidents and instances
of fraud
• Consideration of the potential impact of the UK
Government’s consultation on ‘Restoring Trust in Audit
and Corporate Governance’ upon both the committee
and the wider group risk management framework
Additionally, throughout the reporting period and pursuant
to the Terms of Reference, the Risk Committee Chairs,
together with other Committee members (to the extent
appropriate), remained in ongoing dialogue with key
individuals involved in the Group’s governance, including
the Chair, the CRO and the Head of Internal Audit, to
ensure the necessary intra-functional transparency
and alignment.
Risk management
and internal controls
In accordance with the FRC’s Guidance on “Risk
Management, Internal Control and Related Financial
and Business Reporting” (September 2014), ultimate
responsibility for the Group’s systems of internal controls
and risk management framework rests with the Board.
However, pursuant to the provisions of the Code and
as reflected in its Terms of Reference, the Risk Committee,
along with the Audit Committee, has delegated responsibility
for the ongoing monitoring and review of the Group’s risk
management and internal control systems, including its
financial, operational and compliance controls.
The Committees have also delegated responsibility for
monitoring and review of the processes and procedures in
place to manage or mitigate principal risks and to identify
emerging risks and review and assess the Company’s risk
appetite and associated stress testing whilst assisting the
Board in its annual review of the effectiveness of these
systems and determining their adequacy (or otherwise).
Information on the Group’s risk management framework
can be found on pages 83-93 of the Strategic Report,
together with details of the processes and controls which
were in place throughout the reporting period to manage
and mitigate risk and provide the Board with the required
assurance that sound systems of risk management and
internal controls exist throughout the Group.
The Viability Statement is set out on pages 93-95
of the Strategic Report.
Focus for 2023
During the current financial year it is anticipated that key
areas of focus for the Risk Committee will be as follows:
• Oversee the management and reporting of principal
and operational risks and the application of our
risk appetite
• Monitor the identification and quantification
of emerging risks and the business response
• Receive updates, as applicable to risk, on the key
elements of the UK Government consultation on
proposed audit and corporate governance reforms
On behalf of the Risk Committee
Gillian Kent
Chair of the Risk Committee
17 April 2023
132
131
Annual Report 2022
Role and responsibilities
To ensure it is well-placed to execute its principal
functions within the Group’s governance infrastructure,
the Nomination Committee’s Terms of Reference
incorporate the salient elements of the Code in
respect of Board appointments, orderly succession
planning and the oversight of a diverse succession
pipeline. Stated duties and responsibilities which
were considered and discharged, as appropriate,
throughout the 2022 reporting period included:
• as noted above, the ongoing review of the
structure, size and composition (including the
skills, knowledge, experience and diversity)
of the Board and identifying and nominating
potential Board appointees as required;
• recommending suitable SID candidates to the
Board (discussed in further detail in the “Board
composition” section which follows); and
• reviewing Board and Senior Management succession
plans, taking into account both the challenges
and opportunities facing the Group and the skills,
experience and knowledge required within the
Company and the Board to effectively manage
and exploit such challenges and opportunities.
To ensure that suitable and timely Board and Senior
Management appointments are made, the Terms
of Reference expressly provide that the Nomination
Committee must remain abreast of strategic and
commercial issues affecting the Group and the markets
within which it operates. Accordingly, in addition to the
Board strategy session which took place in November 2022
following the appointment of the new independent NEDs,
Nomination Committee Report
Members and attendance
Co mmittee member Position Attendance
Charles Allen Chair¹ 2/2
Iain McDonald Member 6/6
Gillian Kent Member² 1/1
Zillah Byng-Thorne Former Member³ 5/5
Dominic Murphy Former Chair⁴ 4/4
Having been appointed as Nomination Committee Chair in
June 2022, I would like to welcome you to the Nomination
Committee Report for the 2022 financial year and convey
my gratitude to my predecessor, Dominic Murphy, for his
strong leadership of the Committee since the IPO and
to Zillah Byng-Thorne for her contribution as a
Committee member.
As we indicated in the 2021 Annual Report, Board
composition was expected to be a key focus throughout
2022 and, pleasingly, significant progress was made
in this regard. Acknowledging my mandate to improve
independence and diversity and heedful of the Committee’s
responsibility to keep the structure, size and make-up of
the Board under ongoing review, a successful recruitment
process was undertaken which resulted in the appointment
of two independent NEDs during the year with certain
Executive Director changes also taking place in January
2023 (further information on which follows).
1. Charles Allen was appointed Nomination Committee Chair on 10 June 2022.
2. Gillian Kent was appointed to the Nomination Committee upon her appointment to the Board on 15 September 2022.
3. Zillah Byng-Thorne stepped down from the Board and as a member of the Nomination Committee on 15 September 2022.
4. Dominic Murphy stepped down from the Board and as Nomination Committee Chair on 8 June 2022.
“The Nomination Committee remains committed to ensuring that the Company’s
leadership is, at all times, appropriately constituted to oversee THG’s continued
growth and deliver on its value creation plans. Further independent NED
appointments are therefore expected during 2023 as we continue to enhance
and strengthen the Group’s governance standards and infrastructure.”
The Nomination Committee nonetheless remains mindful of
Code Provision 11, discussed in detail within the “Corporate
Governance Statement” section of the Governance Report;
in conjunction with the Board, the Committee will continue
to seek alignment with this Code Provision as a matter of
priority during 2023 and having regard to, amongst other
things, the FCA’s D&I targets (as incorporated within
Listing Rule 14.3.33R) and the need to ensure the necessary
succession plans are in place and the Company’s
leadership is, at all times, properly constituted to oversee
the delivery of the Group’s strategic aims and objectives.
In recommending any potential appointee, the Nomination
Committee recognises the importance of promoting diverse
and inclusive Board membership, but always comprising
individuals who are considered the ‘right THG fit’, and, in
line with the relevant Code Provision, appointments will
continue to be made on the basis of merit with potential
appointees assessed against objective criteria.
Gillian Kent and Dean Moore, commercial knowledge
and insights were shared with all Board members on
an ongoing basis through the provision of strategic and
market updates at scheduled monthly Board meetings.
Composition and meetings
Reflecting the equivalent Code Provision, the Nomination
Committee’s Terms of Reference provide that a majority
of its members must be NEDs who are independent in
character and judgement and free from any relationships
or circumstances which are likely, or could appear, to affect
their judgement. They further provide that the Nomination
Committee Chair should be either the chair of the Board
or an independent NED. Membership of the Committee,
as set out in the preceding table, therefore aligns with
these requirements, with the Nomination Committee
Chair, Charles Allen, and Gillian Kent both deemed to be
independent upon appointment to the Board during 2022
(and as detailed within the “Board independence” section
of the Governance Report). Biographies of all Nomination
Committee members can be found on pages 108-110
of the Governance Report.
Whilst the Terms of Reference provide that at least two
Nomination Committee meetings must be held annually,
additional meetings may take place as either required by
the Nomination Committee Chair or as requested by any
Committee member should they consider it necessary and,
although attendance is restricted to Committee members,
others may be invited if considered appropriate and
necessary e.g. the CEO and/or external advisers. During the
2022 reporting period, four scheduled meetings took place
with two additional meetings convened to consider certain
changes to Board composition and the Board recruitment
process more generally.
Charles Allen,
Lord Allen of Kensington CBE
Chair of the Nomination Committee
133 134
Annual Report 2022
Activities of the Nomination Committee
Board composition
As disclosed in the 2021 Annual Report, a review of the
Group’s corporate governance arrangements identified
the need for an independent chair and Russell Reynolds
Associates, an independent search consultant, was formally
appointed to assist with the recruitment process. The
search for a suitable candidate was launched in the 2021
reporting period and culminated in the appointment of
Charles Allen as Independent Chair on 22 March 2022.
As further disclosed within the 2021 Annual Report, in
recommending Charles Allen to the Board the Nomination
Committee had given robust consideration to candidate
shortlists and engaged in significant deliberations
around, for example, relevant experience, knowledge
and skillsets and whether shortlisted candidates could
be viewed as the ‘right THG fit’. Face-to-face interviews
with shortlisted candidates were undertaken by members
of the Nomination Committee, and other NEDs and
members of Senior Management participated in the
process to the extent considered appropriate.
In light of the Independent Chair’s mandate to, amongst
other things, enhance governance and transparency
and refresh and strengthen the Board by improving
its independence and diversity, Board composition
remained an ongoing focus of the Nomination Committee
throughout 2022. Noting that two former independent
NEDs, Tiffany Hall and Dominic Murphy, stepped down
from the Board in the first half of the year, particular
consideration was given to overall independence
and the balance of Executive Directors / NEDs.
Leading recruitment consultancy firm Axon Moore was
engaged by the Company to assist in the search for
suitable independent NEDs, with a mandated brief which
acknowledged the benefits which a diverse Board could
bring and which sought to identify suitably skilled and
experienced candidates who aligned culturally with the
organisation. The executive chair and co-founder of Axon
Moore is David Moore, a founder investor in the Company.
Aside from this connection, Axon Moore has no other
connections with the Company or individual Directors.
Following an initial desk search and database review,
Axon Moore produced a longlist of potential appointees
which they subsequently refined to a shortlist following
an extended interview process. At the same time, the
Nomination Committee also drew up a shortlist of
potential appointees, comprising individuals who had
been recommended from the professional networks of
the independent NEDs, and thereafter members of the
Nomination Committee, wider Board and, as required,
Senior Management participated in interviews with
candidates from both the external and internal shortlists.
As with the process to appoint the Independent Chair,
relevant experience, knowledge and skillsets were
considered key factors in identifying potential appointees
who were the ‘right THG fit’ and, following detailed
discussions, the Nomination Committee recommended
both Gillian Kent and Dean Moore as independent
NEDs. In line with the relevant provisions of both the
Code and the Committee’s Terms of Reference, Gillian
Kent and Dean Moore were appointed, following
Board approval, on 15 September 2022 on the basis of
merit and as assessed against objective criteria, due
regard being had to the benefits of a diverse Board
(including with respect to gender). As noted in the
Governance Report, both of these NEDs possess
extensive sector-specific and PLC experience and
have demonstrable track records in business growth -
their knowledge and insight are considered invaluable
as the Company seeks to develop and refine the
strategic drivers underpinning THG's future growth.
At the same time as Gillian Kent and Dean Moore were
appointed to the Board, Zillah Byng-Thorne, former
SID, stepped down from the Board together with NED
Andreas Hansson. Pursuant to its Terms of Reference,
the Nomination Committee was therefore required to
consider suitable candidates for the role of SID, with
reference to the then-current composition of the Board
and the balance of Executive Directors / NEDs. Following
detailed consideration, Damian Sanders was identified
as a suitable candidate for the role of SID and his
appointment was approved on an interim basis as the
Company continued to monitor and reshape its leadership
to ensure it was properly constituted to drive long-term,
sustainable growth and Shareholder value creation.
As a result of this ongoing review of THG’s leadership
needs and the balance of skills, knowledge and experience
on the Board, the Nomination Committee thereafter
recommended certain changes to the Executive Leadership
Team – specifically, that independent NED Damian
Sanders assume the role of CFO and John Gallemore,
the incumbent CFO, remain an Executive Director and be
appointed to the newly-created, stand-alone role of COO.
In light of the scale and pace of the Group’s international
growth since IPO, the role of COO is now viewed as
integral in developing and driving THG’s global fulfilment
footprint and the implementation of such changes would
allow John Gallemore, who had been covering both the
Finance and Operations functions, to focus solely on the
latter and continue to evolve and strengthen the Divisional
commercial and operating models. Further, the Nomination
Committee considered that Damian Sanders was ideally
placed to assume the role of CFO having acquired an
in-depth understanding of the Group, its People and its
culture during his two-year tenure as an independent NED,
including serving as interim SID, Audit Committee Chair
and chair of the Divisional Reorganisation Committee, and
also playing a key role in the internal reorganisation of the
Group’s principal trading Divisions during 2021/2022.
In assuming the CFO position, Damian Sanders would
simultaneously step down as interim SID and as chair and
a member of certain Board Committees. Accordingly, upon
reviewing Board composition and the balance of Executive
Directors / NEDs, the Nomination Committee agreed that
Dean Moore was a suitable candidate for the position of
SID and recommended his appointment, also on an interim
basis and until such times as a suitable long-term candidate
was identified (with reference to future independent
NED appointments). The Nomination Committee’s
recommendations were duly considered and approved
by the Board and took effect from 24 January 2023.
As also required under its Terms of Reference, the Nomination
Committee considered Board composition and the
performance of individual Directors in advance of the 2022
AGM and, following the requisite deliberations, recommended
to the Board that all Directors be put forward for annual
election or re-election (as appropriate) by Shareholders.
Board Committee composition
Board Committee membership was updated at various
points during 2022 to reflect the NED changes which took
place throughout the year and, as mandated, the Nomination
Committee was responsible for making recommendations to
the Board in respect of such membership (where appropriate,
following consultation with the relevant Board Committee
Chair). In making such recommendations, which were ultimately
accepted and implemented by the Board, the Nomination
Committee took into account not only the specific skillsets and
experience of individual NEDs but also the time commitment
expected of them and their external commitments.
The Board Committee changes which took place during
2022 are detailed within the respective Board Committee
Reports on pages 123-157, together with current Board
Committee composition, but key changes included the
appointments of Gillian Kent and Dean Moore to, respectively,
Risk Committee Chair and Remuneration Committee Chair
upon their appointments to the Board on 15 September 2022
and, following Damian Sanders’ appointment to CFO, Dean
Moore’s appointment to interim Audit Committee Chair and
Related Party Committee Chair on 24 January 2023.
As the Board currently comprises only two independent
NEDs, Gillian Kent and Dean Moore (excluding the Chair),
this has resulted in the non-satisfaction of the membership
requirements of the Audit Committee and the Risk Committee
since the date of Damian Sanders’ appointment as an
Executive Director. This position is temporary and expected
only to continue until the appointment of at least one new
independent NED in the coming months which will ensure
that the applicable membership requirements are satisfied
under the Code and the Terms of Reference of these Board
Committees. Throughout 2023 the Nomination Committee,
in conjunction with the wider Board, will continue its search
for additional independent NEDs to further enhance the
composition and diversity of the Board and establish
a robust succession pipeline.
Board evaluation
The annual Board evaluation is considered a vital corporate
governance tool which serves to both enhance Board
effectiveness and maximise Company/Group performance.
In recognition of this, and whilst only strictly applicable to
FTSE 350 companies, the Company previously committed
to undertaking an externally facilitated review within three
years of Admission, in addition to conducting the annual
performance evaluation of the Board, the Board Committees,
the Independent Chair and individual Directors.
The Company engaged a third party during 2021 to provide an
online digital platform through which it undertook a formal and
rigorous Board evaluation in the first quarter of 2022 (the “2021
evaluation”). The 2021 evaluation was aligned with best market
practice and the content tailored, as appropriate, to the particular
requirements of the Company, with specific reference to Matthew
Moulding’s then-dual role of Company chair and CEO. The
decision was taken to continue to utilise this platform for Board
evaluation purposes and a second evaluation took place at the
end of the 2022 reporting period (the “2022 evaluation”). Whilst
the content of the 2022 evaluation was substantially similar
to the 2021 evaluation, the principal differences related to the
appointment of the Independent Chair during 2022 and the clear
division of responsibility established between the leadership
of the Board and the executive leadership of the business.
An area highlighted for consideration in the 2021 evaluation
related to the form and content of monthly Board meetings.
Whilst this is considered in more detail within the “Board
meetings and activities” section of the Governance Report on
pages 105-122, changes effected during the course of 2022 to
address evaluation feedback included streamlining Board pack
content and the standard Board agenda, Senior Management
presenting on a “taken as read” basis and, in line with the
Company’s ongoing PLC transition, the introduction of regular
“deep dives” into key Divisional and/or Group topics on which
Directors have requested further insight/discussion.
Whilst the 2022 evaluation outcomes remain subject to
consideration at the date of this Annual Report, Board meeting
form and content again appear as a theme; for example,
suggestions include an increased focus in Board discussions
on Group strategy and the evolution of the business model and
the further refinement of Board packs from an operational and
financial reporting perspective. Improved scoring is evident in
areas of the 2022 evaluation relating to value creation and
strategy, albeit macroeconomic conditions are recognised
as having impacted strategy delivery during the year.
135 136
Annual Report 2022
The 2022 evaluation outcomes in respect of the Independent
Chair are reflective of the feedback generated through the
annual SID-led appraisal which took place amongst the
NEDs at the end of 2022; the strong experience, commercial
knowledge and facilitative and inclusive manner of the
Independent Chair were acknowledged in both the NEDs’
discussion and the 2022 evaluation, together with the
governance improvements implemented during their tenure
to date. Notably, certain of the 2022 evaluation outcomes
specifically acknowledge that the Board is in transition and
suggest it could be enhanced by increased diversity and
the addition of particular skillsets (e.g. e-commerce and/or
technology), thus aligning with the Nomination Committee’s
key recruitment priorities.
Diversity and inclusion
Pursuant to its Terms of Reference the Nomination
Committee must ensure that the promotion of diversity,
including (but not limited to) diversity of gender and
social and ethnic backgrounds, is a key consideration
when reviewing leadership appointments and succession
planning and, in conjunction with the People team, is
expected to take an active role in setting and monitoring
Group diversity objectives and strategies. Indeed, the
Nomination Committee recognises and embraces
the benefits attendant in a diverse Board (and Senior
Management) membership and, to the extent practicable
and appropriate, is committed to building upon the Group’s
robust commitment in this area. This is evidenced by the
aforementioned NED recruitment brief, the parameters
of which not only recognise the need to identify suitably
skilled and experienced candidates but also take into
account the FCA’s D&I targets (as incorporated within
Listing Rule 14.3.33R). Whilst the search for independent
NEDs remains ongoing, challenges have been encountered
to date identifying suitable candidates who also satisfy
the diversity criteria.
More generally, as a Disability Confident Committed
employer, the Company must ensure that its recruitment
processes are inclusive and accessible, including any
recruitment activity undertaken from a Board and Senior
Management perspective. Recruitment will therefore
continue on a meritocratic basis and founded on the principle
of fairness for all and with due regard to the D&I targets
contained within the 2030 Sustainability Strategy, further
details on which are contained in the “Sustainability” section
of the Strategic Report on pages 71-73. Key strategic targets
under THG x Planet Earth include achieving 50% female
representation and at least 15% ethnic minority representation
on the Board and in Senior Management by 2030.
To ensure the Nomination Committee (and the Board
collectively) remains suitably apprised of material People
issues (including D&I items) to allow it to effectively
discharge the responsibilities incumbent upon it, the Group
Talent Director, who has ultimate oversight of, amongst
other things, general workforce diversity, attends scheduled
Board meetings to provide regular on-topic updates.
Further and as previously discussed within this Annual
Report, the Group launched its new D&I Strategy during
2022 with the objective of building upon its approach to
D&I at every level within the organisation and becoming
an industry pioneer in driving social change. It is anticipated
that the Group’s D&I Committee, founded as a platform
through which to improve the employee journey and
establish a truly inclusive Group environment, will be
instrumental in driving the progression of the Strategy
throughout the organisation.
Further information on the Group’s approach to D&I,
including strategy, associated objectives and related
employee initiatives, is contained within the Governance
Report and in the “Empowering people and communities”
section of the Strategic Report. The diversity disclosures
required pursuant to section 414C of the Companies
Act can be found within the “Our people” section of the
Strategic Report.
AGM
As in previous years, the Nomination Committee is
scheduled to convene ahead of the AGM to review overall
Board composition and, pursuant to its Terms of Reference,
the continuation (or otherwise) of individual Directors, with
reference to their performance and ability to contribute to
the Board in light of the knowledge, skills and experience
required. Following due and careful consideration of all
relevant factors, including (but not limited to) the time
committed to discharge the responsibilities incumbent
upon them as Directors, the Committee will make its
recommendations as to whether Directors should be
put forward for election or re-election (as appropriate)
by Shareholders.
On behalf of the Nomination Committee
Charles Allen,
Lord Allen of Kensington CBE
Chair of the Nomination Committee
17 April 2023
Related Party Committee Report
Co mmittee member Position Attendance
Dean Moore Chair
1
1/1
Gillian Kent Member
2
n/a
Damian Sanders Former Chair
3
6/6
Zillah Byng-Thorne Member
4
5/5
I have pleasure in introducing the Related Party Committee
Report for the 2022 financial year. Having been appointed
as Committee Chair earlier this year, I would like to take
this opportunity to restate the Committee’s commitment to
ensuring that all Related Party Transactions remain subject
to robust evaluation prior to approval (or otherwise) and
to confirm that the requisite governance arrangements are
in place to allow for the full and effective oversight of both
existing and potential conflicts of interest.
As disclosed in previous Annual Reports, prior to Admission
to the London Stock Exchange, THG divested the Propco
Group, which owns property assets occupied and utilised
1. Dean Moore was appointed a member of the Related Party Committee upon his appointment to the Board on 15 September 2022. He thereafter assumed
the position of Related Party Committee Chair on 24 January 2023 when Damian Sanders stepped down upon his appointment as an Executive Director.
2. Gillian Kent was appointed a member of the Related Party Committee on 24 January 2023.
3. Damian Sanders, previously a member of the Related Party Committee, assumed the position of Chair on 15 September 2022 when Zillah Byng-Thorne
stepped down from the Board and as Related Party Committee Chair. He thereafter stepped down as Related Party Committee Chair upon his appointment
as an Executive Director on 24 January 2023 and was replaced by Dean Moore, a member of the Committee and interim SID.
4. Zillah Byng-Thorne stepped down from the Board and as Related Party Committee Chair on 15 September 2022 and was replaced by Damian Sanders,
a member of the Committee and the then interim SID.
Dean Moore
Chair of the Related Party Committee
by the Company and its operating businesses. As the
Propco Group is wholly owned by Matthew Moulding,
the CEO and a major shareholder in the Company, the
divestment was overseen and approved by the independent
NEDs to ensure both actual and potential conflicts
of interest arising from the transaction were properly
managed and resolved. Whilst the lease arrangements
which operated between the Propco Group and THG and
its operating businesses prior to the Propco Transaction
were unchanged by the divestment in 2020 and continue to
remain in place, certain changes took place during the 2022
reporting period which are explained in further detail below.
“The Related Party Committee ensures that strong
governance is in place and that any transactions
classified as a ‘Related Party Transaction’ are approved.
The key objective is shareholder value protection.”
Members and attendance
137 138
Annual Report 2022
On behalf of the Related Party Committee
Dean Moore
Chair of the Related Party Committee
17 April 2023
Composition and meetings
In recognition of the Related Party Committee’s key
governance function, its Terms of Reference provide that
members must be independent NEDs who are appointed
by the Board upon the recommendation of the Nomination
Committee (and in consultation with myself as Committee
Chair). Current Committee membership is set out in
the preceding attendance table and, as noted above,
I assumed the position of Committee Chair when Damian
Sanders stepped down from the Committee following his
appointment as an Executive Director in January 2023.
The Terms of Reference provide that meetings of the
Related Party Committee are held at such times as the
Committee Chair requires, although any member of the
Committee may request a meeting if they consider it
necessary. As can also be seen from the attendance table,
six meetings of the Related Party Committee took place
during the 2022 financial year, in February, March, two
meetings in May, August and October, at which certain
salient matters were subject to detailed consideration
(please refer to the section below entitled “Activities
of the Related Party Committee”). Whilst only members
are entitled to attend Committee meetings, the Terms
of Reference provide that others, including external
advisers, may attend by invitation when considered
necessary and appropriate.
Role and responsibilities
As detailed within its Terms of Reference, the key function
of the Related Party Committee is to oversee and approve
(where appropriate) the terms of any Related Party
Transaction and to ensure that any such arrangement is
conducted on standard commercial terms and at arm’s
length. The Related Party Committee is cognisant of
the critical role which it plays within THG’s corporate
governance infrastructure and, as required by its Terms of
Reference, has regard to certain mandated factors when
assessing any Related Party Transaction (such as whether
the Related Party Transaction can be viewed as fair and
reasonable and in the best interests of the Group (including
from the perspective of the Company and minority
shareholders)).
Whilst the Terms of Reference provide that Related Party
Transactions may not be authorised or implemented by
the Board unless they have been positively recommended
by the Related Party Committee, they do contain a caveat
to this default position; specifically, if deemed to be in the
best interests of the Company, the Board may resolve
that the Committee’s views are not binding but rather of
a recommendary nature in respect of certain categories
of Related Party Transactions. Noting the important role
which the Related Party Committee plays within the
Group’s governance framework, the importance of ensuring
the Committee is operating to maximum effectiveness
is acknowledged and this is managed through Board
discussions and the annual Board and Board Committee
evaluation exercise.
Activities of the Related
Party Committee
In addition to the ongoing oversight and approval (where
appropriate) of Related Party Transactions, the Committee
gave specific consideration to the following matters during
the 2022 reporting period and in the period up to the date
of this Report:
Officers of the Company
As noted in the 2021 Annual Report, officers of the Propco
Group were then also officers of the Company and certain
of its subsidiaries. Acknowledging the conflict of interest
that may arise from such a position, the decision was taken
to resolve this crossover in officer appointments by 31
December 2022. The necessary action was taken during
the reporting period such that Propco Group officers are
now fully independent of the Group.
Separation of the Group
To ensure the relevant property interests (leases) sat
within the appropriate division following the internal
Group reorganisation which completed during the 2022
financial year, consent was required to be sought from the
Propco Group to reassign and sublet a number of lease
agreements to alternative Group entities. The Related Party
Committee challenged whether this proposal would involve
variations to the existing lease agreements (including in
respect of rent payable by the Group). It was confirmed that
no variations would be required and thereafter the Committee
approved the proposal to seek the relevant consent.
Capital expenditure
Capital expenditure incurred by the Company on properties
leased from the Propco Group - the rationale for the spend
incurred in the year and the nature of the work completed,
ensuring this was appropriate and expenditure expected
of a tenant. The Committee concluded that the nature of
works and level of spend were appropriate.
Schedule of leases
The leases in place were entered into prior to divestment
of the Propco Group to Moulding Capital which preceded
the IPO and therefore prior to the formation of the Related
Parties Committee. A summary of all such leases and terms
was presented to the Committee. The leases and terms
therein were reviewed.
A summary of the rent payable together with the market
rent at inception was also reviewed. Actual rent at the time
of inception varied when compared with market rent at this
time. The Committee subsequently reviewed current market
rent information provided by THG Property specialists and
concluded that the actual rents were appropriate when
reviewed across the Portfolio.
Management charge
Under the terms of a Master Services Agreement (“MSA”),
a management charge is levied upon the Propco Group
by THG for the provision of specified services. The MSA
was updated during the reporting period to reflect the fact
that certain processes, historically performed by THG on
behalf of the Propco Group, would gradually be transferred
over to the Propco Group. The Related Party Committee
considered this change in arrangements between THG
and the Propco Group was satisfied this increased the
independence of Propco and thereafter approved the
revised charge due under the MSA.
Other items
The Related Party Committee approved the details of
the Company’s charitable donation to The Moulding
Foundation. The charitable donation is paid by the
Company in lieu of Matthew Moulding waiving as
much of his annual salary as is legally permissible.
The Committee approved the purchase of fixtures and
fittings from Propco where costs had been paid by MCL on
behalf of THG in respect of a fitout of one of the properties
leased by THG. An extensive review was completed by
management and presented to the Committee to ensure
that all assets were in existence and that all assets were
in use by THG. All assets were then agreed to invoice and
physical existence verified. In addition, legal specialists
and property specialists were engaged to ensure that
this transaction was completed on an arms-length basis.
Following completion of this work and after approval
by the Related Parties Committee the amount was
recognised as an amount owed to related parties (note 27).
139 140
Annual Report 2022
Iain McDonald
Chair of the Sustainability Committee
Sustainability Committee Report
As Chair of the Sustainability Committee and on behalf
of the Board, I am delighted to once again introduce
the Sustainability Committee Report for the 2022
reporting period. Last year THG published its 2030
Sustainability Strategy, THG x Planet Earth, which
represented a significant step in defining the Company’s
key sustainability-related priorities and goals and which,
importantly, also included medium and long-term targets.
As Sustainability Committee Chair, I am very pleased to
note that during 2022 good progress was made towards
achieving the Group’s key sustainability targets, further
information on which can be found in the “Sustainability”
section on pages 57-73. Notable milestones include:
• submission of THGs net zero targets for validation
by the SBTi;
• defining of THG own-brand packaging roadmaps;
• continuation and improvement in supply chain
mapping and ethical supply chain roadmap;
• establishing THG Eco with a primary focus
on climate action; and
• approval of THG’s first Social Impact Strategy.
Composition and meetings
The Sustainability Committee’s Terms of Reference provide
that the Committee should comprise a minimum of three
members, at least one of whom should be a NED, with
any two Committee members required for a quorate
meeting. Members of the Committee are appointed by
the Board, upon the recommendation of the Nomination
Committee, and whilst, collectively, the Committee must
possess the competence relevant to the sectors in which
the Company operates, individual members must also
have the skillsets and experience relevant to Sustainability
Committee membership. In satisfaction of the relevant
provisions of the Terms of Reference, membership of the
Sustainability Committee currently comprises myself, Iain
McDonald, a NED and Sustainability Committee Chair,
Steven Whitehead, Group Commercial Director and Philip
Pratt, former Chief Sustainability Officer and now external
sustainability advisor to the Committee. As detailed above,
Tiffany Hall, a former NED, was also a member of the
Committee during the reporting period until she stepped
down from the Board on 18 March 2022.
Committee member Position Attendance
Iain McDonald Chair 5/5
Steven Whitehead Member
1
4/5
Philip Pratt Member
2
5/5
Tiffany Hall Former Member
3
1/1
1. Steven Whitehead sits on the Sustainability Committee in his capacity as Group Commercial Director.
2. Prior to his departure from the Company at the beginning of 2023, Philip Pratt sat on the Sustainability Committee in his capacity as Chief Sustainability Officer.
Since his departure Philip Pratt has continued to serve as a member of the Committee but in the capacity of external sustainability adviser to the Committee.
3. Tiffany Hall stepped down from the Board, and as a member of the Sustainability Committee, on 18 March 2022.
Whilst the Terms of Reference mandate that at least three
Sustainability Committee meetings must be held annually,
and at such other times as the Sustainability Committee
Chair may require, five meetings took place during 2022,
with member attendance set out in the foregoing table.
As detailed in the 2021 Annual Report and in recognition
of the Group’s robust sustainability targets and
commitments, it is expected that the Committee will
continue to convene in excess of the stated requirements
during the current financial year.
Additionally, any Sustainability Committee member may
request a meeting of the Committee if they consider it
necessary and, whilst only members of the Committee (and
any individual entitled to be present as an observer) have
the right to attend Committee meetings, other external
advisers may be invited to attend when appropriate.
The Committee also has Board authority to secure the
attendance of any other person as and when considered
necessary. During 2022, the Chief Risk Officer, the General
Counsel and Company Secretary, the Procurement Director
and the Group Director of HSE regularly attended meetings
at the request of the Committee, along with other members
of Senior Management.
Role and responsibilities
The role of the Sustainability Committee is narrated within
its Terms of Reference which clarify that its overarching
purpose is to ensure that the Group has appropriate and
effective strategies, policies and operational controls in
place to allow its business to be conducted in a responsible
manner and to ensure accountability in respect of
performance against the 2030 Sustainability Strategy and
applicable targets. The specific duties of the Committee
are detailed within the Terms of Reference and include
responsibilities such as reviewing and monitoring:
• the Group’s strategies, policies and targets in relation
to, for example, energy and carbon management,
climate change, waste and recycling;
• Senior Management’s assessment of the health,
safety, security, environmental and social impacts
resulting from the Group’s operations, with particular
regard to the impact on its employees, suppliers,
contractors and host communities; and
• the Group’s systems for compliance with applicable
environmental/sustainability-related legal and
regulatory requirements and performance against
those requirements.
To ensure the full and effective discharge of its duties,
the Terms of Reference provide that the Sustainability
Committee will have access to such sufficient resources as
are necessary (including advice and assistance from Group
Secretariat or the specialist support of external advisers).
Activity during the year
The Committee has a number of standing agenda items which
it considers in line with its Terms of Reference including:
• reviewing internal reports on progress towards
set targets and KPIs in support of the 2030
Sustainability Strategy and agreeing further
targets and KPIs where appropriate;
• assessment, benchmarking and recommendations on
policies, processes, and procedures for sustainability;
• overseeing the Group’s conduct with regard to its
corporate and societal obligations, including reviewing
THG’s statement on Modern Slavery and Trafficking;
• in conjunction with the Risk Committee, reviewing
Climate Change, Environmental and Social
Responsibility as a principal risk to ensure relevant
sub-risks are identified and the necessary actions
taken to mitigate these risks; and
• monitoring and reviewing processes for the risk
assessment of corporate responsibility, sustainability,
and compliance and ethical conduct.
Activities of the
Sustainability Committee
A summary of the key activities undertaken by the
Sustainability Committee during the 2022 financial
year is as follows:
• sustainability linked remuneration targets for the
Executive Leadership Team reviewed and recommended
to the Remuneration Committee for approval;
• review of the Group’s baseline Scope 1, 2 and 3
emissions, setting net zero targets for submission
to the SBTi for validation;
• ethical supply chain update and supplier survey
results review;
• approval of Social Impact Strategy and updated
D&I Strategy;
• circularity and plastics action plan update;
• Investor Relations – ESG rating agencies
perspectives update;
• TCFD and non-financial reporting regulations
compliance update;
• THG Eco business model and route to market update;
and
• HSE review and progress update.
”The Sustainability Committee plays a crucial role in ensuring the business
is delivering its Sustainability Strategy, THG x Planet Earth, and will
continue to oversee future progress towards medium and long-term
targets. An enhanced understanding of its environmental and social
impact allows THG to create value and opportunities for stakeholders
across the Group’s value chain.”
Members and attendance
141 142
Annual Report 2022
Focus for 2023
During the current financial year, it is anticipated that
key areas of focus for the Sustainability Committee will
be as follows:
• oversee and make recommendations to the
Executive Leadership Team and the Board
for actions to be taken in respect of the Group’s
sustainability, ethics and compliance strategies,
policies, programmes, and activities;
• take a proactive approach in anticipating
and preparing for non-financial legislative
or regulatory changes and reviewing processes
to ensure compliance;
• undertake the bi-annual review of the 2030
Sustainability Strategy, objectives, and targets; and
• monitor and review progress relating to TCFD,
particularly in understanding potential risks
and uncertainties based on outcomes of the
scenario analysis.
On behalf of the Sustainability Committee
Iain McDonald
Chair of the Sustainability Committee
17 April 2023
As the recently appointed Chair of the Remuneration
Committee, I am delighted to introduce the Directors’
Remuneration Report for the 2022 financial year and
would like to thank Damian Sanders for assuming the role
of Chair on an interim basis, and leading the Committee,
in the period prior to my appointment. I would echo
Damian’s sentiments in the 2021 Annual Report that the
Remuneration Committee remains committed to ensuring
that the Group’s leadership is appropriately motivated
and incentivised to deliver long-term sustainable growth
for Shareholders, noting that a key component of this is
ensuring that the Group continues to attract and retain
talent with the knowledge and skillsets required to
maximise the organisation’s performance and success.
Committee member Position Attendance
Dean Moore Chair
1
1/1
Iain McDonald Member 6/6
Gillian Kent Member
2
n/a
Damian Sanders Former Member
3
6/6
Dominic Murphy Former Member
4
3/4
Tiffany Hall Former Member
5
3/3
Directors’ Remuneration Report
Dean Moore
Chair of the Remuneration Committee
1. Dean Moore was appointed Remuneration Committee Chair upon his appointment to the Board on 15 September 2022.
2. Gillian Kent was appointed to the Remuneration Committee on 24 January 2023 when Damian Sanders stepped down as a member upon his appointment
as an Executive Director.
3. Damian Sanders was appointed Remuneration Committee Chair on an interim basis on 18 March 2022 but stepped down from this position upon Dean
Moore’s appointment to the Committee on 15 September 2022. He thereafter stepped down as a member of the Committee upon his appointment as an
Executive Director on 24 January 2023.
4. Dominic Murphy stepped down from the Board and as a member of the Remuneration Committee on 8 June 2022.
5. Tiffany Hall stepped down from the Board and as Remuneration Committee Chair on 18 March 2022. Damian Sanders assumed the position of Chair on an
interim basis from this date until Dean Moore’s appointment on 15 September 2022.
This Directors’ Remuneration Report has been prepared in
accordance with The Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008 (as
amended), the Listing Rules and the Code and is divided
into three sections:
• this annual statement from me, the Remuneration
Committee Chair;
• the Remuneration Policy; and
• the Annual Report on Remuneration which
details payments made to Directors in the 2022
reporting period and which is subject to an advisory
Shareholder vote at the forthcoming AGM.
“The Remuneration Committee is committed to ensuring that the
Company’s leadership is suitably motivated and incentivised to
successfully implement the Company’s strategy, in turn delivering
long-term, sustainable growth for stakeholders, and the current
Remuneration Policy has been designed to support these objectives.”
Members and attendance
143 144
Annual Report 2022
On behalf of the Remuneration Committee
Dean Moore
Chair of the Remuneration Committee
17 April 2023
Composition and meetings
The Terms of Reference provide that the Remuneration
Committee must comprise not less than three NEDs, the
majority of whom must be independent, who are selected
by the Board on the recommendation of the Nomination
Committee and in consultation with the Remuneration
Committee Chair (who must also be an independent NED).
With the exception of Iain McDonald, all Remuneration
Committee members are deemed to be independent and it is
considered that current membership ensures the Committee
is well-placed to operate at maximum effectiveness. Whilst
recognising the Code’s position that only independent non-
executive directors should sit on a company’s remuneration
committee (and as discussed further in the Corporate
Governance Statement on page 107), the Board does
not consider that it would be in the best interests of the
Company and its stakeholders for Iain McDonald to step
down from membership of the Committee at the present
time. In addition to the fact that the Board currently comprises
only two independent NEDs, both of whom are members
of the Committee, the Board believes that Iain McDonald’s
extensive remuneration experience is not only a valuable
addition to the Remuneration Committee but also serves to
enhance its overall balance of knowledge and skillsets. It is
therefore anticipated that Iain McDonald’s membership of the
Remuneration Committee will continue for the time being,
albeit the matter will be kept under ongoing review with
regard to, for example, the timing and independence
of future Board appointees.
As detailed above, Tiffany Hall stepped down from the
Board and as Remuneration Committee Chair on 18 March
2022. Damian Sanders assumed the position of Chair at this
time on an interim basis until Dean Moore was appointed
to the Board and as Remuneration Committee Chair on
15 September 2022. Damian Sanders remained a member
of the Committee until his appointment as an Executive
Director on 24 January 2023, at which point Gillian Kent
assumed membership of the Committee. Dominic Murphy
was also a member of the Committee during the 2022
reporting period until he stepped down from the Board on
8 June 2022.
A summary of these changes, together with the other Board
changes which took place during 2022, is as follows (with
further details included within the Governance Report):
NED /
Former NED
Appointment Resignation Date
Tiffany Hall
✓ 18 March 2022
Charles Allen
✓ 22 March 2022
Dominic Murphy
✓ 08 June 2022
Gillian Kent
✓ 15 September 2022
Dean Moore
✓ 15 September 2022
Zillah Byng-Throne
✓ 15 September 2022
Andreas Hansson
✓ 15 September 2022
Damian Sanders
n/a n/a 24 January 2023
1
1. This is the date on which Damian Sanders stepped down as a NED and
was appointed an Executive Director.
At least two Remuneration Committee meetings must take
place annually and at such other times as required by the
Remuneration Committee Chair or as requested by any
Committee member should they consider it necessary. The
Remuneration Committee met on six occasions during 2022,
with member attendance set out in the foregoing table.
The Terms of Reference provide that whilst only Committee
members are entitled to attend these meetings others, such
as Senior Management and external advisers, may be invited
to attend as and when considered appropriate, as was the
case during the reporting period.
Role and responsibilities
As detailed within its Terms of Reference, a primary
responsibility of the Remuneration Committee is to
determine the remuneration package of Executive Directors
and the Independent Chair. More generally, it is the
responsibility of the Remuneration Committee to ensure that
remuneration practices and policies support the Group’s
strategy and promote its long-term sustainable success.
Other key duties of the Committee, as detailed within the
2021 Annual Report, include:
• approving the design of, and determining targets for,
any performance-related pay schemes operated by the
Company and the payments made thereunder;
• exercising its use of discretion, where appropriate, to
override formulaic remuneration outcomes;
• reviewing the ongoing appropriateness and relevance
of the Remuneration Policy (further details on which
follow), together with the approach to implementation,
in the context of pay policies and practices across
the wider workforce and the Group’s culture,
while consulting with, and seeking approval from,
Shareholders (and other stakeholders) as appropriate;
and
• reviewing and having regard to pay and employment
conditions across the Company and/or Group as a whole,
including those of the Executive Leadership Team.
Remuneration Policy
To ensure the Remuneration Policy was suitably future-
proofed for the medium term certain amendments were
proposed at the 2022 AGM, including the incorporation
of a market standard shareholding requirement for future
Executive Directors and the introduction of a LTIP, to allow
awards to be granted to certain Executive Directors and thus
maximise alignment with long-term Shareholder interests.
Whilst these amendments were approved by Shareholders,
the Remuneration Committee will, as mandated, continue to
review the ongoing suitability of the Remuneration Policy to
ensure it remains fit for purpose and evolves as required.
2022 remuneration outcomes
The Remuneration Committee operated the Remuneration
Policy broadly as intended during the 2022 reporting period,
with the exception that no performance-related pay awards
were made in 2022. In light of the global macroeconomic
environment both Matthew Moulding and John Gallemore
opted to waive their entitlement to participate in the annual
bonus plan for the 2022 reporting period (as in prior years).
Further, whilst the introduction of a LTIP was approved by
Shareholders at the 2022 AGM, the decision was taken to
refrain from making any awards under it for the same reason.
No salary increases were awarded during the 2022
reporting period and, as was the case for the 2021 reporting
period, Matthew Moulding waived as much as was legally
permissible of his base salary in return for the Group making
a charitable donation of similar value. John Gallemore also
waived as much as was legally permissible of his base salary
in return for the Group making a charitable donation of
similar value for the period 1 January 2022 to 30 June 2022,
after which he was paid his normal contractual salary.
Remuneration for 2023
The Remuneration Committee intends to implement
the Remuneration Policy during 2023 as follows:
Base salary
A key activity of the Remuneration Committee during 2022
was the consideration and approval of the remuneration
package for Damian Sanders following his appointment to
the role of CFO on 24 January 2023. Remuneration for this
role will be operated in line with the Remuneration Policy,
with a base salary of £500,000 per annum being payable
from the date of his appointment.
No salary increases will be awarded to Matthew Moulding
or John Gallemore for the 2023 reporting period.
Annual bonus
A review of THG’s sustainability strategy was undertaken
during 2021, involving robust engagement with investors,
partners and wider stakeholders, to ensure the Group
had appropriate and effective strategies, policies and operational
controls in place to conduct its business in a responsible
manner (including performance against the 2030 Sustainability
Strategy and in relation to ESG matters more generally). From
a remuneration perspective, a notable outcome of this review
was the setting of sustainability-linked objectives. From 2022
onwards, sustainability-linked objectives will be assessed in the
annual bonus scorecard for the CEO, members of the Executive
Leadership Team and Senior Management.
In line with the Remuneration Policy, annual bonus awards
will be granted with a maximum opportunity of 100% of base
salary for each of Matthew Moulding, John Gallemore and
Damian Sanders. The measures and weightings for the 2023
bonus awards will be:
• Group Sales (20%);
• Group adjusted EBITDA (30%);
• Free Cash Flow (25%); and
• Strategic objectives including ESG metrics (25%).
LTIP
In line with the Remuneration Policy, the Remuneration
Committee intends to grant awards of 250% of base salary
to each of John Gallemore and Damian Sanders under the LTIP
during 2023. Awards will be subject to stretching financial and
strategic performance targets which will be disclosed at the time
of grant and measured over a three-year period, with a further
two-year post-vesting holding period applying in line with the
relevant Code requirement and market best practice.
Consideration of stakeholder views
Prior to annually reviewing the remuneration of the Executive
Directors, the Remuneration Committee considers pay,
benefits and share scheme practices for employees across
the Group. Whilst no direct workforce engagement took place
in respect of the Remuneration Policy changes which were
approved at the 2022 AGM, the adoption of a LTIP for Executive
Directors is aligned with the approach to Senior Management
remuneration. The Group is committed to promoting and
maintaining good relations with employees and, where relevant,
their representative bodies as part of its broader workforce
engagement strategy and intends to enhance the level of its
remuneration-specific engagement over the course of 2023.
AGM
I very much look forward to meeting with Shareholders at
the forthcoming AGM to discuss any queries or comments
on this Directors’ Remuneration Report or on Group
remuneration matters more generally. If necessary, I can
be contacted in advance of the AGM, via the Company
Secretary, to discuss any more pressing remuneration
questions which Shareholders may have.
145 146
Annual Report 2022
Component
and objective
Operation Opportunity Performance
measures
Base salary
To enable the Group
to attract, motivate
and retain the
people it needs to
maximise the value
of the business
Generally reviewed each year, with
increases effective 1 January.
Salary levels take account of:
• salaries at FTSE companies of broadly
similar size or sector to THG;
• salary increases across the
rest of the UK business;
• role, personal performance
and experience; and
• business performance and
the external environment.
There is no fixed maximum.
Salaries in respect of the year
under review (and for the following
year) are disclosed in the Annual
Report on Remuneration.
Salary increases for Executive Directors
will normally not exceed those of the
wider workforce over the period this
Remuneration Policy applies. Where
increases are awarded in excess of
the wider employee population, the
Remuneration Committee will provide
the rationale in the relevant year’s Annual
Report on Remuneration (e.g. if there is
a material change in the responsibility,
size or complexity of a role).
n/a
Pension
To provide a level
of retirement benefit
that is competitive in
the relevant market
Executive Directors receive pension contributions
either as a direct payment or a cash allowance.
Base salary is the only element of
remuneration that is pensionable.
Executive Directors receive a Company
contribution of a maximum in line
with the wider workforce for the
relevant country. This is currently
set at 3% of pensionable salary
for UK Executive Directors.
Pensionable salary is determined in
line with the approach taken for the
wider workforce which is currently
in line with auto-enrolment levels.
n/a
Benefits
To provide a level
of benefits that is
in line with relevant
market practice
Executive Directors may be provided with
medical insurance benefits, permanent health
insurance and life assurance.
Other benefits, including all employee share
schemes, may be introduced from time
to time to ensure the benefits package is
appropriately competitive and reflects the
needs and circumstances of the Group
and individual Executive Directors.
Benefits may vary by role and the level is
determined each year to be appropriate
for the role and circumstances of
individual Executive Directors.
It is not anticipated that the cost of
benefits (as set out in the Annual
Report on Remuneration) will increase
materially over the period for which
this Remuneration Policy applies.
The Remuneration Committee retains
the discretion to approve a higher
cost in exceptional circumstances (e.g.
relocation expenses or an expatriation
allowance on recruitment) or in
circumstances where factors outwith the
Group’s control have changed materially
(e.g. market increases in insurance costs).
n/a
Introduction
As detailed above, certain amendments to the
Remuneration Policy were approved by Shareholders
at the 2022 AGM (with 99.88% of votes in favour),
with the amendments to the Remuneration Policy
becoming effective upon approval.
Remuneration Policy
A summary of the Remuneration Policy is set out
below for reference to assist with the understanding
of this Directors’ Remuneration Report. Full details
of the Remuneration Policy can be found on
pages 183-193 of the 2021 Annual Report.
Component
and objective
Operation Opportunity Performance
measures
Annual bonus
To focus Executive
Directors on
achieving demanding
annual targets
relating to Group
performance
Performance targets are set at the start of each
financial year and aligned with the annual
budget agreed by the Board. At the end of the
financial year in question, the Remuneration
Committee determines the extent to which
these targets have been achieved.
50% of the total bonus payable is normally
paid in cash with 50% deferred in nil cost
options over Ordinary Shares. These options
are exercisable after three years, subject to
continued employment and malus (in whole
or in part) during the deferral period in the
event of a material misstatement in accounting
records, gross misconduct, calculation error
or corporate failure. Cash bonuses may be
subject to clawback over the deferral period
in similar circumstances as identified above.
A payment equivalent to the dividends that would
have accrued on deferred bonus awards that
vest may be made to participants on vesting.
Maximum opportunity: 200% of base
salary (with 50% deferred into Ordinary
Shares vesting after three years).
Target opportunity: 50% of
maximum opportunity.
Threshold opportunity: at most,
25% of maximum opportunity.
Matthew Moulding and John Gallemore
will have a reduced opportunity of
100% of salary which will be payable
fully in cash. They also intend to waive
any amounts which become payable
under the annual bonus scheme
in future years in lieu of donations
to charity of a similar amount.
The bonus will be based on the
achievement of financial and non-
financial performance targets which
may vary year-to-year but at least
50% of the total opportunity will be
based on financial performance.
Details of the measures and weighting
on which the bonus will be based will
be disclosed in the relevant Annual
Report on Remuneration. If the
Remuneration Committee determines
certain targets to be deemed
commercially sensitive, the targets
will be disclosed retrospectively.
The Remuneration Committee has
discretion to adjust the formulaic bonus
outcomes (including down to zero)
within the limits of the scheme if the
formulaic outcome is not reflective of
underlying business performance.
LTIP
To incentivise
Executive Directors
whilst providing
alignment with
Shareholder interests
Awards are granted annually in the form of nil
cost options or conditional awards of Ordinary
Shares. These will vest at the end of a three-year
period subject to continued employment and
satisfaction of the performance conditions.
A further two-year holding period
will apply post-vesting.
The Remuneration Committee may
award dividend equivalents on awards
to the extent that these vest.
Malus and clawback provisions will apply to
enable the Company to recover sums paid or
withhold the payment of any sum in the event of a
material misstatement resulting in an adjustment
to the audited consolidated accounts of THG
or action or conduct which, in the reasonable
opinion of the Board, amounts to employee
misbehaviour, fraud or gross misconduct.
Normally annual awards of up to
250% of base salary. In exceptional
circumstances, such as to secure an
external appointment or in specific
retention scenarios, an award of up to
300% of base salary may be made.
Matthew Moulding will not be
eligible to participate in the LTIP.
The majority of the awards will be
based on financial metrics, with the
balance based on strategic metrics.
The Remuneration Committee retains
discretion, in exceptional circumstances,
to change performance measures
and targets and the weightings
attached to performance measures
partway through a performance
period if there is a significant and
material event which causes the
Remuneration Committee to believe
the original measures, weightings and
targets are no longer appropriate.
The Remuneration Committee also
has discretion to adjust the formulaic
vesting outcome (including down to
zero) within the limits of the scheme if
the formulaic outcome is not reflective
of underlying business performance.
Shareholding
requirement
To align Executive
Director and
Shareholder interests
and reinforce
long-term decision
making, including
for a period following
cessation of
employment
Matthew Moulding and John Gallemore are
required to retain at least 50% of any incentive
awards that vest (net of tax) until they have
built up a personal holding of Ordinary
Shares worth at least 350% of salary.
Any future Executive Directors must build up
and subsequently retain a shareholding of at
least 200% of salary over a five-year period from
the date of their appointment to the Board.
A post-cessation shareholding requirement of
350% of salary to be held for two years after an
Executive Director’s employment is terminated
in the case of Matthew Moulding and John
Gallemore and 200% of salary for any future
Executive Directors (or full actual holding if lower).
n/a n/a
Chair and
NED fees
To attract and
retain NEDs of the
highest calibre with
broad commercial
experience relevant
to the Group
NEDs are paid a basic annual fee. Additional
fees may be paid to NEDs who chair a Board
Committee and/or sit on a Board Committee
to reflect additional responsibilities.
The fees paid to NEDs are determined
by the Board and may be paid in a
mix of cash and Ordinary Shares.
Fee levels are reviewed periodically, with
any adjustments effective 1 January. Fees are
reviewed by considering external advice on
best practice and fee levels at other FTSE
companies of broadly similar size and sector
to THG. Time commitment and responsibility
are also considered when reviewing fees.
Fee increases will be applied considering
the outcome of the review.
The fees paid to NEDs in respect of
the year under review (and for the
following year) are disclosed in the
Annual Report on Remuneration.
n/a
147 148
Annual Report 2022
Salary
& fees1
(£’000)
Benefits
(£’000)
Pension
(£’000)
Total
fixed pay
(£’000)
Annual bonus1
(£’000)
LTI P
(£’000)
Other
(£’000)
Total
variable pay
(£’000)
Total
(£’000)
Executive Directors
Matthew Moulding
2022 21 12 0 33 0 0 0 0 33
2021 20 433
2
0 453 0 0 0 0 453
John Gallemore
2022 235 5 1 241 0 0 0 0 241
2021 20 5 0 25 0 0 0 0 25
NEDs
Charles Allen
3
2022 328 0 0 328 0 0 0 0 328
2021 n/a n/a n/a n/a n/a n/a n/a n/a n/a
Damian Sanders
4
2022 157 0 0 157 0 0 0 0 157
2021 132 0 0 132 0 0 0 0 132
Edward Koopman
2022 36 0 0 36 0 0 0 0 36
2021 35 0 0 35 0 0 0 0 35
This section covers the reporting period from 1 January 2022 to 31 December 2022 and provides details of the implementation
of the Remuneration Policy during the period, as well as the intended implementation during the current 2023 reporting period.
Annual Report on Remuneration
Single total figure of remuneration (audited)
The following table provides a single figure for total remuneration of the Directors for the financial year to 31 December 2022,
together with comparative figures for the financial year to 31 December 2021. The values of each element of remuneration
are based on the actual value delivered, where known. The value of the annual bonus includes both the cash element and
the element deferred into Shares.
Former NEDs
Tiffany Hall
5
2022 19 0 0 19 0 0 0 0 19
2021 81 0 0 81 0 0 0 0 81
Dominic Murphy
5
2022 29 0 0 29 0 0 0 0 29
2021 93 0 0 93 0 0 0 0 93
Zillah Byng-
Thorne
5
2022 71 0 0 71 0 0 0 0 71
2021 100 0 0 100 0 0 0 0 100
Andreas Hansson
5
2022 25 0 0 25 0 0 0 0 25
2021 6 0 0 6 0 0 0 0 6
Iain McDonald
2022 58 0 0 58 0 0 0 0 58
2021 60 0 0 60 0 0 0 0 60
Gillian Kent
3
2022 30 0 0 30 0 0 0 0 30
2021 n/a n/a n/a n/a n/a n/a n/a n/a n/a
Dean Moore
3
2022 30 0 0 30 0 0 0 0 30
2021 n/a n/a n/a n/a n/a n/a n/a n/a n/a
1. From Admission and subject to minimum statutory limits, Matthew Moulding has elected to waive his salary with John Gallemore electing to waive his
salary for the period from Admission to 30 June 2022. The salaries and bonuses detailed in the table above for these individuals are the amounts received
in the periods. For the financial year ending 31 December 2021, the salaries waived by Matthew Moulding and John Gallemore were £730,414 and £430,414
respectively. For the financial year ending 31 December 2022, the salaries waived by Matthew Moulding and John Gallemore were £729,331 and £214,328
respectively. The Group made charitable donations equivalent to these amounts which are in addition to the donations included in the Adjusted Items
set out in Note 4 to the Financial Statements. For the financial year ending 31 December 2022, both Matthew Moulding and John Gallemore waived their
entitlement to participate in the annual bonus plan, as they did for the financial year ending 31 December 2021.
2. In line with the previous Remuneration Policy, the Company provided private security cover to Matthew Moulding and his family to allow him to carry out his
duties as CEO. Whilst the cost of this cover is included within the 2021 benefits figure it has been personally funded by Matthew Moulding from 1 January
2022 onwards and is not therefore included within Matthew Moulding’s remuneration figure for the 2022 reporting period.
3. The figures for the 2022 reporting period have been pro-rated to reflect Charles Allen’s appointment to the Board from 22 March 2022 and the
appointments of Gillian Kent and Dean Moore from 15 September 2022.
4. Damian Sanders was appointed chair of: (i) the Divisional Reorganisation Committee upon its inception on 1 July 2021 and remained as chair until
the Committee’s dissolution on 31 July 2022; and (ii) the Profit Improvement Committee, established to oversee efficiency projects across the Group,
incorporating oversight of cost rationalization programmes and specific review of areas identified for performance improvement (the “PIC”), upon its
inception on 1 August 2022. He received a fee of £80,000 (pro-rated as appropriate) in respect of each of these chairships during the 2022 reporting period.
5. The figures for the 2022 reporting period have been pro-rated to reflect Tiffany Hall stepping down from the Board on 18 March 2022, Dominic Murphy
stepping down from 8 June 2022 and each of Zillah Byng-Thorne and Andreas Hansson stepping down from 15 September 2022.
Base salary (audited)
The base salaries of the Executive Directors are typically
reviewed on an annual basis, with any increases effective
from 1 January. As detailed in the Remuneration Policy,
when determining any increases the Remuneration
Committee compares the Group’s remuneration packages
for its Executive Directors with those of directors in FTSE
companies of similar size or sector to THG and also takes
account of salary increases across the rest of the UK
business, an individual’s role and personal performance,
business performance and the external environment.
No salary increases were awarded to Executive Directors
during the 2022 reporting period. As such, at 31 December
2022 salary levels were as follows:
• Matthew Moulding: £750,000; and
• John Gallemore: £450,000.
As previously stated, Matthew Moulding waived as much
as was legally permissible of his base salary during the
2022 reporting period in return for the Group making a
charitable donation of similar value. John Gallemore also
waived as much as was legally permissible of his base
salary in return for the Group making a charitable donation
of similar value for the period 1 January 2022 to 30 June
2022. For the financial year ending 31 December 2022, the
salaries waived by Matthew Moulding and John Gallemore
were £729,331 and £214,328 respectively.
Pension (audited)
As part of their remuneration arrangements, the Executive
Directors are entitled to receive pension contributions from
the Company. Under these arrangements, they can elect for
those contributions to be paid in the form of taxable pension
allowance or direct payments into a personal pension plan
or the Group’s UK defined contribution scheme.
During the 2022 reporting period, £433 and £872 were
paid into the personal pension plans of Matthew Moulding
and John Gallemore respectively. This represented 3% of
pensionable salary.
Benefits (audited)
In line with the current Remuneration Policy, benefits in
kind for each of Matthew Moulding and John Gallemore
comprised medical insurance benefits, permanent health
insurance and life assurance. Matthew Moulding has
personally funded his private security from 1 January
2022 onwards.
Bonus awards (audited)
Both Matthew Moulding and John Gallemore chose
to waive their entitlement to participate in the annual
bonus plan for the 2022 financial year.
Scheme interests awarded (audited)
No such awards were made to Directors during the
2022 financial year.
Payments to past Directors (audited)
No payments were made to past Directors during
the 2022 financial year.
Loss of office payments (audited)
No loss of office payments were made during the
2022 financial year.
External appointments
None of the Executive Directors received any fees
in relation to external non-executive roles.
149 150
Annual Report 2022
180
160
140
120
100
80
60
40
20
0
Director Ordinary
Shares
D1 Shares D2 Shares Deferred
2 Shares
E Shares F Shares G Shares H Shares
Executive Directors
Matthew Moulding
1,2
198,744,095 50,550,450 360 (equivalent to
66,772 Ordinary
Shares)
18,346,774 43,641,266 20,197,808 7,733,792 0
John Gallemore 104,237 3,533,879 3,174 (equivalent to
588,702 Ordinary
Shares)
813,345 185,476 2,666,963 4,000,537 0
NEDs
Charles Allen
3
2,400,000 0 0 0 0 0 0 0
Damian Sanders3 21,926 0 0 0 0 0 0 0
Edward Koopman 0 0 0 0 0 0 0 0
Iain McDonald 2,505,943 0 0 14,524 185,476 0 0 0
Gillian Kent 0 0 0 0 0 0 0 0
Dean Moore 0 0 0 0 0 0 0 0
Former NEDs
Tiffany Hall4 33,557 0 0 0 0 0 0 0
Dominic Murphy5 14,566,016 0 0 29,047 370,953 0 0 0
Zillah Byng-Thorne
6
69,765 0 0 25,417 0 0 0 0
Andreas Hansson6 0 0 0 0 0 0 0 0
Directors’ shareholdings (audited)
The table below shows the shareholdings of each Director as at 31 December 2022:
1. In addition to the Shares shown above, Matthew Moulding holds 1 Special Share (further details on which are set out in the Directors’ Report).
2. 160,486,876 of the Ordinary Shares, 10,971,090 of the Deferred 2 Shares and all of the F Shares and G Shares owned by Matthew Moulding are held by FIC
ShareCo Limited, a corporate entity wholly owned by Matthew Moulding. Additionally, 9,834,879 of the Ordinary Shares shown in the table above are held
by Jodie Moulding, Matthew Moulding’s wife.
3. Charles Allen and Damian Sanders hold Shares and, in consideration of these individual shareholdings and NED independence, the Board has applied
its assessment criteria including, but not limited to, whether a NED has held a material business relationship with the Company in the last three years.
Taking into account assessments of materiality and the 3% notification threshold under the DTRs’ major shareholdings notification regime, the Board
acknowledges that the shareholdings of these NEDs sit significantly below the notification threshold and therefore do not impair their independence.
4. Tiffany Hall stepped down from the Board on 18 March 2022 and her shareholding is stated as at this date.
5. Dominic Murphy stepped down from the Board on 8 June 2022 and his shareholding is stated as at this date.
6. Both Zillah Byng-Thorne and Andreas Hansson stepped down from the Board on 15 September 2022 and their shareholdings are stated as at this date.
There have been no changes to Directors’ shareholdings between 31 December 2022 and the date of this Directors’
Remuneration Report.
Directors’ share ownership guidelines (audited)
As described in the Remuneration Policy, Matthew Moulding and John Gallemore are both expected to build up a holding
in Ordinary Shares equal to 350% of their base salary over a period of time. NEDs are not subject to any shareholding
requirements. Executive Directors’ share ownership at the end of the 2022 reporting period was as follows:
Director Shareholding requirement
(%age of salary)
Shareholding as at 31 December
2022 (%age of salary)
Shareholding
requirement met?
Matthew Moulding 350% 25,200%
1
Yes
John Gallemore 350% 1,472%
2
Yes
1. Matthew Moulding’s aggregated shareholding includes all Shares (i.e. Ordinary Shares, D1 Shares, D2 Shares, E Shares, F Shares, G Shares and Deferred 2
Shares) held by Matthew Moulding, his wife, Jodie Moulding, and FIC ShareCo Limited, a corporate entity wholly owned by Matthew Moulding.
2. John Gallemore’s aggregated shareholding includes all Shares (i.e. Ordinary Shares, D1 Shares, D2 Shares, E Shares, F Shares, G Shares and Deferred 2
Shares) held by him.
Current shareholdings are based on Shares owned outright and valued using the average Ordinary Share price over the
three months ended 31 December 2022 i.e. £0.557.
Performance graph and table
The following graph shows the TSR (i.e. total shareholder return) performance over the period from Admission to 31
December 2022 relative to the FTSE 250 Index. It illustrates the performance of a £100 investment in the Company in that
period compared with the value of £100 invested in the FTSE 250 Index over the same period.
While the FTSE 100 Index was used in previous years, the FTSE 250 Index is now considered to be a more appropriate
comparator for this purpose as it is a broad equity index into which the Company’s market cap falls.
Listed Dec 20
THG PLC FTSE250
Dec 21 Dec 22
151 152
Annual Report 2022
Chief Executive Officer’s historical remuneration
The following table details the Chief Executive Officer’s remuneration for each of the last three financial years:
2020 2021 2022
Single figure (£’000) 870,139 453 33
Bonus outcome as a percentage of maximum 100% n/a
1
n/a1
Long-term incentive outcome as a percentage of maximum 100% n/a2 n/a
2
1. Matthew Moulding waived his entitlement to participate in the annual bonus plan for each of the 2021 and 2022 financial years.
2. No LTIP was eligible to vest in respect of either the 2021 or 2022 financial years and Matthew Moulding does not participate in any ongoing LTIP.
Percentage change in Directors’ remuneration
The Executive Directors are the only employees of the Company and therefore the UK workforce has been selected as the
appropriate comparator group to provide a meaningful comparison since this is the geographical location in which all of
the Executive Directors and the majority of NEDs are based. Accordingly, the following table shows the percentage change
in the Directors’ salaries, benefits (excluding pension) and annual bonuses between the 2020 and 2021 and 2021 and
2022 financial years, compared with the percentage change in the average of each of these components of pay for all UK
employees for each of these periods. The comparison uses a per capita figure.
2021 to 2022 2020 to 2021
Salary / fees Benefits Bonus Salary / fees Benefits Bonus
Executive Directors
Matthew Moulding
1
5.5% -97.3% n/a -95.8% 17.0 % -100%
John Gallemore
2
1,100.7% 2.6% n/a -91.6% 63.0% -100%
NEDs
Charles Allen n/a
3
0% n/a
4
n/a
3
n/a
3
n/a
4
Damian Sanders 18.8%
5
0% n/a
4
780% 0% n/a
4
Edward Koopman 2 .1% 0% n/a
4
250% 0% n/a
4
Iain McDonald -2.8% 0% n/a
4
325% 0% n/a
4
Gillian Kent n/a
3
0% n/a
4
n/a
3
n/a
3
n/a
4
Dean Moore n/a
3
0% n/a
4
n/a
3
n/a
3
n/a
4
Wider workforce
Average employee6 10.5% -20.8% -85.4% 10.1% 217.3% -37.5%
Former NEDs
Tiffany Hall -76.3%
7
0% n/a
2
n/a
8
0% n/a
2
Dominic Murphy -68.5%
7
0% n/a
2
244% 0% n/a
2
Zillah Byng-Thorne -29.1%
7
0% n/a
2
100% 0% n/a
2
Andreas Hansson 313.6%
7
0% n/a
2
n/a
8
0% n/a
2
1. From Admission and subject to minimum statutory limits, Matthew Moulding has elected to waive his salary and the percentage increase stated above
reflects changes in these statutory limits rather than changes to salary levels. The reduction in the benefits figure relates to Matthew Moulding’s private
security cover which was funded by the Company in 2021 and personally funded from 1 January 2022 onwards. As in 2021, Matthew Moulding waived his
entitlement to participate in the annual bonus plan.
2. During 2021 John Gallemore elected to waive his salary subject to minimum statutory limits. In 2022 John Gallemore elected to waive his salary to 30 June
2022 and since this date has been paid his standard base salary. The percentage increase stated above reflects John Gallemore electing not to waive his
salary during the period 1 July 2022 to 31 December 2022. As in 2021, John Gallemore waived his entitlement to participate in the annual bonus plan.
3. Charles Allen, Gillian Kent and Dean Moore were not Directors during the 2021 financial year. Charles Allen was appointed to the Board on 22 March 2022
and Gillian Kent and Dean Moore were both appointed on 15 September 2022.
4. NEDs are not entitled to participate in the annual bonus plan.
5. Damian Sanders was appointed chair of: (i) the Divisional Reorganisation Committee upon its inception on 1 July 2021 and remained as chair until the
Committee’s dissolution on 31 July 2022; and (ii) the PIC upon its inception on 1 August 2022. He received a fee of £80,000 (pro-rated as appropriate) in
respect of each of these chairships during the 2022 reporting period.
6. THG PLC is the parent company of the Group and, with the exception of the Executive Directors, does not have any employees. The figures detailed here are
therefore representative of the Group’s UK workforce.
7. Each of these former NEDs stepped down from the Board during the 2022 reporting period. Tiffany Hall stepped down on 18 March 2022, Dominic Murphy
stepped down on 8 June 2022 and both Zillah Byng-Thorne and Andreas Hansson stepped down on 15 September 2022.
8. Each of these former NEDs were also not Directors during the 2020 reporting period. Tiffany Hall was appointed to the Board on 12 January 2021 and
Andreas Hansson was appointed to the Board on 26 October 2021.
UK employees (full-time equivalents)
Year 25
th
percentile Median 75
th
percentile
2022 Salary £23,018.10 £26,679.32 £38,158.33
2022 Total pay and benefits £27,872.37 £29,977.27 £39,942.46
Chief Executive Officer’s pay ratio
The following table presents the pay ratio between the Chief Executive Officer’s single total figure of remuneration and
that of the Group’s UK workforce. The ratios compare the Chief Executive Officer’s single total figure of remuneration
with the total remuneration of full-time equivalent UK employees at the 25
th
, median and 75
th
percentiles.
UK employees (full-time equivalents)
Year
Method
CEO remuneration
(£,000)
25
th
percentile
pay ratio
Median pay ratio
75
th
percentile
pay ratio
2022 Option A 33 1.2:1 1.1:1 0.8:1
2021 Option A 453 21:1 18:1 14:1
The total pay and benefits and salary figures used for the pay ratio calculations are set out in the following table:
The 25
th
percentile, median and 75
th
percentile figures used to determine the above ratios were selected by reference to
the hourly pay figures for the Group’s UK workforce. Option A, as set out under the Regulations, was used to calculate
remuneration for the 2022 financial year as the Company believes this is the most robust methodology for calculating these
figures (and reflects the approach adopted for the 2021 financial year). The full-time equivalent annualised remuneration
(comprising salary, benefits, pension, annual bonus and long-term incentives) was then calculated for those employees
for the 2022 financial year.
The ratio continues to reduce year-on-year, primarily as a result of Matthew Moulding waiving as much of his base
salary as is legally permissible in return for the Group making a charitable donation of similar value, as well as waiving
his entitlement to participate in the annual bonus and not participating in any long-term incentive scheme. Executive
Director pay is, typically, more at risk than wider employee pay due to the use of variable pay which is not guaranteed and
hence, depending on incentive plan outcomes, can lead to a total pay ratio that varies significantly from year-to-year. The
Remuneration Committee notes that the pay ratios for 2022 reflect the fact that the CEO waived most of his remuneration
for the financial year. Furthermore, the Committee believes that THG’s reward policies are not only aligned with the Group’s
shared values and culture but also incentivise and drive the right behaviours and ensure all employees are rewarded fairly
and competitively for their contribution to the Group’s success. For these reasons, the Committee is satisfied that the
median pay ratio is consistent with the Group’s pay, reward and progression policies.
THG PLC is the parent company of the Group and, with the exception of the Executive Directors, does not have any
employees. The pay ratio figures have therefore been calculated with reference to the Group’s UK workforce which, the
Company believes, is the appropriate comparator being reflective of the wider policies in operation on employee pay,
reward and progression across the vast majority of the Group’s overall workforce.
153 154
Annual Report 2022
Relative importance of spend on pay
The following table details Shareholder distributions and THG expenditure on total employee pay for the 2022 reporting
period versus the prior year, together with the percentage change year-on-year.
2022 (£m) 2021 (£m) %age change
Profit distributed by way of dividend 0 0 n/a
Total spend on remuneration 336.3 305.3 10.16
Shareholder dilution
Any share incentive plans (including The THG PLC 2022 Executive LTIP) post-IPO will be operated in line with the Investment
Association’s Principles of Remuneration which require that commitments under all share schemes satisfied by newly issued
ordinary shares must not exceed 10% of the issued ordinary share capital in any rolling ten-year period, of which up to 5% may
be used to satisfy options under executive share schemes.
As detailed in the 2021 Annual Report and as set out in the Company’s published Prospectus, it was intended that any future
share awards to Group employees (excluding the Executive Directors), for the purpose of making employee incentive awards,
would be satisfied out of the previously authorised but unissued maximum of 9,917,601 F Shares and 14,889,292 G Shares (i.e.
a total of 24,806,893 Shares), following admission of the Ordinary Shares to trading on the London Stock Exchange. During
2022 awards were made using 24,128,750 of these F Shares and G Shares to in excess of 500 employees (excluding Executive
Directors). As these Shares were already reflected in the fully diluted share capital of the Company, their issuance does not
affect overall dilution and thus they have not been included in the dilution percentage which follows.
In October 2022 19,074,902 Ordinary Shares were admitted to trading on the London Stock Exchange to further satisfy
employee incentive awards and ensure the Group continues to attract and retain world-class talent. This new issue of Ordinary
Shares represented 1.51% of the Company’s ordinary issued share capital as at 31 December 2022. To date no Ordinary Shares
have been issued to Executive Directors under any executive schemes.
Shareholder voting at 2022 AGM
At the 2022 AGM the resolutions to approve: the Directors’ Remuneration Report; the changes to the Remuneration Policy;
and the adoption of The THG PLC 2022 Executive LTIP were passed as follows:
Resolution Votes for %age of
votes cast
Votes
against
%age of
votes cast
Tot al
votes cast
%age of
ISC voted
Votes
withheld
To approve the Directors’
Remuneration Report (excluding
the Remuneration Policy)
7 18,2 1 7,975 99.88 885,296 0.12 719,103,271 58.88 14,538,630
To approve the changes
to the Remuneration Policy
718,254,407 99.88 827,864 0.12 719,082,271 58.88 14,559,630
To approve the adoption
of The THG PLC 2022
Executive LTIP
718,241,430 99.88 859,927 0.12 719,101,357 58.88 14,540,544
Benefits
There is no change in benefits provisions for Executive Directors for the financial year ending 31 December 2023.
Annual bonus
In line with the Remuneration Policy, the maximum opportunity for the financial year ending 31 December 2023 will be:
• Matthew Moulding: 100% of base salary;
• Damian Sanders: 100% of base salary; and
• John Gallemore: 100% of base salary.
The measures and weightings for the 2023 financial year will be:
• Group Sales (20%);
• Group adjusted EBITDA (30%);
• Free Cash Flow (25%); and
• Strategic objectives including ESG metrics (25%).
The specific targets are considered commercially sensitive and will be disclosed in next year’s Annual Report on Remuneration.
LTIP
In line with the Remuneration Policy approved at the 2022 AGM, the Remuneration Committee intends to grant a LTIP
award to Damian Sanders and John Gallemore during the 2023 financial year equal to 250% of base salary. This award will
vest three years after grant and will be subject to a further two-year holding period. The award will be subject to stretching
financial and strategic performance conditions which will be disclosed at the time of grant.
Base salary
Base salaries have been reviewed considering individual performance and competitive practice for similar roles in the
Group’s remuneration peer group, together with remuneration awards within the Group itself, and the Remuneration
Committee has concluded there will be no increase in the Executive Directors’ salaries. Therefore, for the financial year
ending 31 December 2023, base salaries will be as follows:
• Matthew Moulding: £750,000;
• Damian Sanders: £500,000; and
• John Gallemore: £450,000.
Pension
There is no change in the contribution percentage for Executive Directors for the financial year ending 31 December 2023
and it remains at 3% of pensionable salary. Pensionable salary is determined in line with the approach taken for the Group’s
wider workforce, which is currently in line with auto-enrolment levels.
Implementation of Remuneration Policy for the 2023 financial year
The Remuneration Committee proposes to implement the Remuneration Policy for the financial year ending 31 December
2023 as set out below.
155 156
Annual Report 2022
On behalf of the Remuneration Committee
Dean Moore
Chair of the Remuneration Committee
17 April 2023
NED fee type Fee
Fee for Independent Chair £400,000
Base fee for independent NEDs £70,000
Base fee for non-independent NEDs £35,000
Additional fee for chairing each of Audit, Risk, Remuneration and Sustainability Committees £12,000
Additional fee for chairing each of Related Party and Nomination Committees £8,000
Additional fee for membership of each of Audit, Risk, Related Party, Nomination, Remuneration
and Sustainability Committees
£5,000
Advisers to the Remuneration Committee
PricewaterhouseCoopers LLP (“PwC”) remain engaged as the Remuneration Committee’s independent remuneration
advisers, having been appointed prior to Admission by the then Remuneration Committee Chair. PwC is a member of the
Remuneration Consultants Group, the professional body for remuneration consultants, and adheres to its Code of Conduct.
The Remuneration Committee is satisfied that the advice provided by PwC during the 2022 reporting period was objective
and independent and, whilst separate teams within PwC also advise the Company on matters of tax, corporate governance
and operations, the Remuneration Committee is further satisfied that these activities do not compromise the independence
or objectivity of the advice it receives from PwC as Remuneration Committee advisers.
During the 2022 reporting period PwC provided general support to the Remuneration Committee and guidance on developments
in remuneration governance and best practice, including associated implications for THG. PwC further advised on:
• the 2021 Directors’ Remuneration Report and the proposed amendments to the Remuneration Policy presented therein;
• the remuneration package for the new Independent Chair;
• the remuneration package for the new CFO;
• the design and implementation of the new Employee Incentive Plan; and
• appropriate performance metrics for 2023 incentive arrangements.
Fees charged by PwC for advice provided to the Remuneration Committee for the financial year ended 31 December 2022
amounted to £78,500 (excluding VAT).
NED fees
A review of the fees paid to NEDs has been undertaken and consequently no increase in fees is proposed for the 2023
financial year. Accordingly, annual NED fees will remain at the following levels:
Financial Statements
158157
Annual Report 2022
Conclusions relating to
going concern
In auditing the financial statements, we have concluded
that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements
is appropriate. Our evaluation of the directors’ assessment
of the Group and parent company’s ability to continue to
adopt the going concern basis of accounting included:
• We have documented and evaluated the process
followed by management to prepare the forecasts
which they have used in their going concern
assessment.
• We audited the forecasts underpinning the going
concern model which are based on the Board-
approved budget, including checking the arithmetical
accuracy and appropriateness of management’s base
case forecast over the going concern assessment
period to 30 April 2024.
• We challenged the reasonableness of the key
assumptions such as the revenue growth rate
and EBITDA margin achieved by the Group used
within the scenarios and validated to supporting
documentation where appropriate.
• We read and evaluated the Group’s lending
agreements to ascertain any financial or non-financial
covenant restrictions which are in place.
• We obtained management’s schedule of loan facilities
and covenants thereon for the going concern period.
We confirmed that loan repayments have been
appropriately included within management’s forecasts
to the extent they are due in the period. We assessed
the forecast compliance of each covenant throughout
the going concern period under each scenario
presented by management which included drawing
funds from the facility.
• We verified the cash positions as at 31 December
2022 and 31 March 2023 to bank statements.
• We compared the forecast results for the year to date to 31
March 2023 to management accounts and flash results.
• We identified additional stress tests that were then
run by management to determine the impact of
changing some of management’s key assumptions
on the going concern assessment. These key
assumptions were in relation to: the revenue growth
rate, and a reduction in the EBITDA margin achieved
by the Group, all of which would impact the liquidity
headroom in the going concern period. Covenant
compliance only becomes relevant if the business
draws down on more than 40% of the existing RCF
facilities. Management performed these stress tests
by sensitising for each key assumption individually
based on their expectation of a reasonable downside
scenario for that assumption, and then prepared a
reverse stress test by sensitising multiple assumptions
in order to reduce headroom to nil. We then evaluated
the likelihood of the scenario that would reduce
headroom to nil.
• We evaluated THG’s ability to undertake mitigating
actions should it experience a severe downside
scenario, considering likely achievability of both
quantum and timing of those actions.
• We reviewed the appropriateness of management’s
going concern disclosure in describing the risks
associated with its ability to continue to operate as a
going concern until 30 April 2024.
• The audit procedures on going concern were
supervised and directed by the audit engagement
partner and senior members of the team.
Our key observations in relation to the work performed are:
• In management’s base case and plausible downside
scenarios the Group retained headroom on forecast
cash and covenant compliance throughout the going
concern assessment period. Nor the base case
or sensitised scenario does not assume any draw
down of the RCF. The lowest level of cash headroom
identified is £253.9m in management’s downside
scenario, this cash headroom position includes a
40% drawdown of funds from the RCF facility of £170m
(less amounts ringfenced for supply chain financing)
which expires in December 2024, in addition to
cash balances.
• Cash balances as at 31 December 2022 total £474m.
The Group is projected to meet all of its covenant
tests (which only apply when the Group draws down
on more than 40% of the RCF facilities) throughout
the forecast period after applying sensitivities and
stress testing modelled by management except for
the reverse stress test which was designed to identify
which assumptions would eliminate headroom in
the model.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Group and parent company’s
ability to continue as a going concern for the period to
30 April 2024.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report. However, because not all future
events or conditions can be predicted, this statement is not
a guarantee as to the Group’s or parent company’s ability to
continue as a going concern.
Group Parent company
Consolidated statement of comprehensive income
for the year ended 31 December 2022
Company balance sheet as at 31 December 2022
Consolidated statement of financial position
as at 31 December 2022
Company statement of changes in equity
for the year ended 31 December 2022
Consolidated statement of changes in equity
for the year ended 31 December 2022
Related notes 1 to 8 to the financial statements
including a summary of significant accounting policies
Consolidated statement of cash flows
for the year ended 31 December 2022
Related notes 1 to 29 to the financial statements,
including a summary of significant accounting policies
Opinion
In our opinion:
• THG plc’s Group financial statements and parent
company financial statements (the “financial
statements”) give a true and fair view of the state of
the Group’s and of the parent company’s affairs as at
31 December 2022 and of the Group’s loss for the year
then ended;
• the Group financial statements have been properly
prepared in accordance with UK adopted international
accounting standards;
The financial reporting framework that has been applied
in the preparation of the Group financial statements is
applicable law and UK adopted international accounting
standards. The financial reporting framework that has
been applied in the preparation of the parent company
financial statements is applicable law and United Kingdom
Accounting Standards, including FRS 101 “Reduced
Disclosure Framework” (United Kingdom Generally
Accepted Accounting Practice).
• the parent company financial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
• the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We
are independent of the group and parent company in
accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
We have audited the financial statements of THG plc (the ‘parent company’) and its subsidiaries (the ‘Group’) for the year
ended 31 December 2022 which comprise:for the year ended 31 December 2021 which comprise:
Independent Auditor's Report
to the Members of THG PLC
159 160
Annual Report 2022
Independent auditor's report to the members of THG PLC (continued)
Overview of our audit approach
Audit scope
We performed an audit of the complete financial information of 1 component and audit procedures
on specific balances for a further 2 components.
The components where we performed full or specific audit procedures accounted for 100% of loss
before tax (review scope components contained a profit), 98% of revenue, 98% of total expenses
and 99% of total assets.
Key audit matters
• Revenue recognition
• Impairment of intangible assets
• Accounting for platform development costs
• Significant disclosures
Materiality
Overall Group materiality of £9.2m which represents 0.4% of total revenue.
An overview of the scope of the
parent company and Group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and
our allocation of performance materiality determine our audit
scope for each company within the Group. Taken together,
this enables us to form an opinion on the consolidated
financial statements. We take into account size, risk profile,
the organisation of the Group and effectiveness of group-
wide controls (including centralised IT systems), changes in
the business environment and other factors such as recent
internal audit results when assessing the level of work to
be performed at each component. We assessed the control
environment and concluded that the most effective approach
to the audit was a substantive and data analytics approach
rather than a controls-based approach.
The scope of the Group audit includes all significant trading
components in the United Kingdom. Full scope components
account for 91% of the Group’s revenue, 92% of the Group’s
expenses, and 94% of the Group’s total assets. Specific scope
components account for 7% of the Group’s revenue, 6% of the
Group’s expenses, and 5% of the total assets. We performed
specified or analytical audit procedures on the other
components. All audit work performed for the purposes
of the Group audit was undertaken by the Group audit team.
Changes from the prior year
There are no significant changes to our scoping from
the 2021 Group audit.
Involvement with component teams
There is no involvement of component teams, all audit work
performed for the purposes of the audit was undertaken by
the Group audit team only. In the prior year, we involved an
EY component team to perform specified procedures on
a newly acquired component in the US. The work on this
component has been performed by the Group audit team in
the current year.
Climate change
There has been increasing interest from stakeholders as
to how climate change will impact THG plc. The Group
has determined that the principal impact will be through
transition and physical risks as described in the TCFD
section on pages 79-82 and in the Sustainability report,
as well as on page 91 within the principal risks and
uncertainties, which form part of the “Other information,”
rather than the audited financial statements. Our procedures
on these disclosures therefore consisted solely of considering
whether they are materially inconsistent with the financial
statements or our knowledge obtained in the course of the
audit or otherwise appear to be materially misstated.
Our audit effort in considering climate change was focused
on ensuring that the effects of climate risks have been
appropriately considered when modelling future cash
flows. We also challenged the Directors’ considerations of
climate change in their assessment of Going concern and
viability and associated disclosures including the Groups
disclosure of its assessment of climate change within the
critical accounting judgements and estimates section of the
Groups accounting policies on page 183.
Whilst the Group has stated its commitment to the
aspirations of the Paris Agreement to achieve net zero
emissions by 2030, the Group is currently unable to
determine the full future economic impact on their business
model, operational plans and customers to achieve this and
therefore as set out above the potential impacts are not
fully incorporated in these financial statements.
Based on our work we have not identified the impact of
climate change on the financial statements to be a key
audit matter or to impact a key audit matter.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether due to fraud) that we identified. These matters
included those which had the greatest effect on the overall
audit strategy, the allocation of resources in the audit;
and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the
financial statements as a whole, and in our opinion thereon,
and we do not provide a separate opinion on these matters.
Risk Our response to the risk
Revenue recognition
(£2,239m, 2021: £2,180m)
Refer to the Audit Committee Report
(page 125); Accounting policies (page 176);
and Note 2 of the Consolidated
Financial Statements.
THG plc has reported revenue of £2,239m
for the year ended 31 December 2022 (2021:
£2,180m).
Revenue is a key metric when evaluating
the performance of the Group and receives
significant scrutiny externally and internally.
Product revenue (D2C/B2B revenue) is
primarily compiled of a large volume of small
value transactions. As the Group makes 28%
of its sales in the final quarter of the year
we have focussed our risk on the final three
months of product sales.
For the risk identified on product revenues we have performed the
following procedures:
We performed a walkthrough of the product revenue process and assessed the
design effectiveness of key controls.
We considered the presentation of revenue against our understanding of the
contractual arrangements in place.
We adopted a data analytics approach in relation to the majority of product
revenue (£1.9bn of £2.1bn) at full and specific scope components. This
involved tracing a full population of transaction data to cash journals which
demonstrated that materially all of the revenue recognised in the year was
received as cash. A sample of the related cash journals were agreed to
bank statement, to ensure the transactions reflected actual revenue related
cash receipts. For any revenue not received as cash we followed through all
significant items to supporting evidence.
We tested a sample of credit notes issued by the Group after the period end
but within the period of the returns policy (between 28 and 60 days depending
on customer type), to identify whether appropriate provisions for returns were
in place at the year end.
For product revenue (B2B) not tested using the data analytics approach (5%
of total revenues), we have agreed a sample of transactions to invoice, proof of
delivery and subsequent cash receipt.
For product revenue (D2C) from marketplace sales not tested using the
data analytics approach (1% of total revenues), we have agreed a sample of
transactions to the third-party merchant’s transaction and settlement reports,
as well as subsequent cash receipt.
We performed an assessment of cash-in-transit balances and tested them by
agreeing a sample through to cash receipts after the year-end.
We tested material reconciling items within trade receivables and performed a
review of aged amounts within the trade receivables ledger.
We tested manual journals to revenue at in-scope components, understanding
the reasons for the transactions and corroborating them to appropriate audit
evidence. We have tested these journals throughout the year, with increased
focus on those booked in the last quarter of the year where we consider there
to be a heightened risk of manipulation. We have also selected a sample of
transactions at random for further testing to build an element of unpredictability
into our testing.
We performed analytical reviews of revenue for review scope entities and
tested trade receivables to post year end cash receipt wherever trade
receivables were in scope.
161 162
Annual Report 2022
Risk Our response to the risk
In regards to the revenue from THG Ingenuity,
the risk we have identified is split across
both product revenues and other revenues
(services, hosting) reported by THG.
As a result, we identified a potential risk
of bias or fraud through management
manipulation by manual adjustments,
especially in the last quarter of the
financial year.
We have identified a potential risk of bias or
fraud through management inappropriately
classifying revenue to THG Ingenuity. We
have also identified a risk of inappropriate
recognition of THG Ingenuity contract revenue
by manipulating the performance obligations
against which revenue is recognised. Our
procedures are responsive to the risk that the
accounting for revenue recognition is not in
line with “IFRS15, Revenue from Contracts
with Customers”.
For the risk identified on Ingenuity and other revenues we performed the
following procedures:
We performed a walkthrough of each significant class of revenue transactions
within THG Ingenuity or ‘Other revenue’ and assessed the design effectiveness
of key controls.
For a sample of new contracts, we reviewed the terms of business and
management’s assessment of how IFRS 15 is applied to the contract terms,
including the identification of performance obligations and allocation of
consideration to each performance obligation identified. We assessed the
status of the project and whether the relevant site had ‘gone live’. Where
these projects were yet to go live, we understood the reasons and considered
whether revenue had been recognised in line with IFRS 15. Our assessment
included, but was not limited to:
• Variable consideration
• Services which have been rendered at nil charge
• Principal vs agent considerations
• Consideration of whether any contracts contain embedded leases (IFRS 16).
For a sample of existing contracts, we enquired of the customer managers as
to whether there had been changes in the contract terms, including changes in
performance obligations and allocation of consideration to each performance
obligation identified.
We tested a sample of other revenue transactions, agreeing the amounts to
invoice, proof of service or cash receipt. For the items selected we tested that
the correct amount of deferred revenue has been recognised at year-end. For
these items we also tested the classification of the revenue by segment.
We challenged management on the classification of revenue as ‘Infrastructure’
and ‘Commerce’ revenue and ensured that different elements of THG Ingenuity
are clearly articulated given external interest in this business.
We tested manual revenue journals at in-scope locations, understanding
the reasons for the transactions and corroborating to appropriate evidence.
We tested these journals throughout the year, with increased focus on
those booked in the last quarter of the year where we consider there to be a
heightened risk of manipulation. We also selected a sample of transactions at
random to build in an element of unpredictability to our testing.
Key observations communicated to the Audit Committee
Through our audit procedures on product revenue, we identified a reclassification for discounts amounting to £17m
between revenue and cost of sales – this has been corrected by management. Based on the audit procedures performed,
we did not identify further evidence of material misstatements in the revenue recognised in the current year. We have
highlighted to the Audit Committee the importance of ensuring that there is clear disclosure regarding classification of
revenues, including any changes. We are satisfied that the disclosures appropriately describe the classification of revenue
and are also in compliance with IFRS 15.
Independent auditor's report to the members of THG PLC (continued)
Risk Our response to the risk
Impairment of intangible assets
£1,276m (2021: £1,506m)
Refer to the Audit Committee Report
(page 126); Accounting policies (page 178);
and Note 11 of the Consolidated
Financial Statements.
The Group’s legal structure was reorganised
during the financial year and as a result of
this there has been a change in the number
of CGUs (“cash-generating units”) identified
by management for the purposes of their
year-end impairment assessment. £1.1bn of
the Group’s intangible assets is contained
within two of the identified CGU’s (THG
Beauty and THG Ingenuity). There is a risk
that these assets recoverable value are below
the carrying amount.
Our procedures to respond to the risk of impairment of intangible
assets included:
We reviewed the basis for the identification of CGUs and concluded that
management’s identified CGUs were appropriate.
We assessed management’s calculation of the discount rate (for each
CGU) and agreed assumptions and peer Group analysis to supporting
documentation in order to ensure that the discount rate used is appropriate
and specific to that CGU.
We challenged the reasonableness of the forecasts used in the assessment
including key assumptions (such as growth rates, EBITDA margins and
discount rates).
We assessed the reliability of management’s forecasts by comparing
previous forecasts to actual results.
We assessed the sensitivities of the headroom to changes in key
assumptions.
We engaged an EY internal expert to review the discount rates applied by
management to forecast cashflows.
We considered analysts’ views on the valuation of the Group with EY
internal expert input to assess if this provided contradictory evidence to
management’s assessment of the value of the Group, and each of its CGUs.
We assessed the impairment disclosure presented by management
and ensured this was in accordance with the requirements of ‘IAS 36
Impairment of Assets’ and ‘IFRS 13 Fair Value Measurement’.
We compared the disclosure with the key assumptions we have audited and
ensured these were consistent and that appropriate sensitivities have been
disclosed.
Key observations communicated to the Audit Committee
We have highlighted to the Audit Committee the sensitivity of the THG Beauty and THG Ingenuity CGU’s (and the
disclosed impairment charges) to reasonably possible changes in key assumptions such as the revenue growth rate and
the discount rate. Management have considered this in the specific risk premiums adopted in their discount rate, the final
impairment charge recorded and the disclosures adopted in the Annual Report and Accounts.
163 164
Annual Report 2022
Risk Our response to the risk
Accounting for platform development costs
£100m (2021: £82m)
Refer to the Audit Committee Report
(page 126); Accounting policies (page 178);
and Note 11 of the Consolidated
Financial Statements.
Within capitalised platform development costs
we have identified a risk that management
and other employee time is capitalised that
does not represent incremental value/future
economic benefits.
Our procedures to respond to the risk on capitalised platform development
costs included:
We performed a walkthrough of significant classes of transactions
associated with platform development costs and understood the relevant
controls.
We interviewed members of the finance team to understand what they do
to ensure only direct costs are capitalised.
We tested a sample of employee timesheets and made inquiries to
understand the nature of their activities and of the project to which their
time had been recorded.
We tested a sample of key projects and made inquiries of the project
managers to understand the nature, timing and purpose of the project.
We assessed whether the capitalisation of these employees / projects was
consistent with the requirements of ‘IAS 38 Intangible Assets’ and ‘SIC 32 –
Intangible Assets – Web Site Costs’.
We reviewed for risk of management bias, particularly in respect of
employees who do not use timesheets.
We reviewed for any significant new projects or changes in judgments
made prior to the year end.
We exercised professional scepticism and performed an unusual phrase
search on the ledger to identify any operational costs incorrectly capitalised.
We performed a trend analysis to assess any unusual fluctuation in the
pattern of time capitalised on a month-on-month basis.
We made inquiries of the Chief Technology Officer to corroborate our
understanding of process and the controls in place to ensure capitalised
projects delivered expected results and whether there is appropriate
oversight of new projects in place to ensure they meet relevant criteria
of IAS 38.
Independent auditor's report to the members of THG PLC (continued)
Key observations communicated to the Audit Committee
We reported certain control observations to the Audit Committee which have been acknowledged. Based on the
procedures we have performed we did not identify material misstatements in the capitalised platform development costs
carried in the statement of financial position.
Risk Our response to the risk
Significant disclosures
Refer to the Audit Committee Report
(page 126); Accounting policies (page 183).
This risk focuses on the more complex or
subjective disclosure items within the ARA
(“Annual Report and Accounts”), which we
consider to be:
• Whether the accounts when taken
as a whole are fair, balanced and
understandable
• Disclosures relating to impairment
• Adjusted profit measures
• Related party transactions
• Narrative related to Ingenuity, and
presentation of segmental reporting
(including the impact of IFRS 5
discontinued operations)
We have considered the areas currently
focussed on by investors, analysts and the
wider market. There is a risk that the accounts
may be presented in a way that does not give
a fair reflection of the business, transactions
and/or is not understandable to the external
users of the financial statements.
We performed the following procedures on the significant disclosure items
noted:
Whether the accounts when taken as a whole are fair, balanced
and understandable
We understood the process that the Board and those charged with governance
implemented to ensure the ARA is fair, balanced and understandable.
In reviewing the ARA we gave specific consideration to whether the business
model and Group’s purpose was clear to the readers of the financial
statements. We also involved a corporate governance specialist to perform an
assessment of the ARA with particular focus on whether it is in compliance
with the UK Corporate Governance code and to enhance our audit challenge
on the ARA and the adequacy of the disclosures made.
We read the disclosures and challenged management to ensure there was an
appropriate balance between the narrative on mature businesses and fast-
growing aspects of the Group’s performance, as well as giving greater clarity on
underlying organic performance.
Disclosures relating to impairment
We assessed the impairment disclosure presented by management and
ensured this was in accordance with the requirements of IAS 36 and IFRS 13.
We compared the disclosure with the key assumptions we have audited and
ensured these were consistent and that appropriate sensitivities have been
disclosed.
Adjusted profit measures (APMs)
Our focus was on ensuring that narrative within the ARA does not give undue
prominence to APMs.
Where APMs are disclosed we checked consistency with the Group’s
accounting policy and ensured that the APM is reconciled to the nearest
GAAP measure.
We performed an assessment of the calculations prepared by management to
quantify the adjustment items. We challenged management on the sufficiency
of disclosures which describe the nature of the adjusted items and checked
they were in line with our understanding of the nature of these items based on
this assessment.
We selected a sample of adjusted items and agreed these costs to invoices
where relevant.
165 166
Annual Report 2022
Risk Our response to the risk
Related party transactions
We walked through and understood the design effectiveness of the governance
and controls management and those charged with governance have put in
place to review and approve transactions with related parties.
We assessed the appropriateness of modifications made to existing related
party relationships and contracts to assess whether they were at an
arms’ length.
We ensured capital expenditure was accounted for by the right entity based
on the terms of the leases.
We read board and committee meeting minutes (including of the Related Party
Committee) to identify related party transactions.
We inspected significant related party contracts.
We performed journal entry testing to assess for the completeness of related
party transactions.
We assessed whether significant related party transactions are on a fair market
basis, or that those that are not on a fair market basis are not material to the
financial statements.
We reviewed other information in the public domain to assess whether
this provided evidence over the completeness of related party transactions
identified by management or contra evidence to our conclusions.
We made inquiries of, and held discussions with, management and those
charged with governance, to identify whether related party transactions
are in accordance with the terms and conditions of the contracts.
We ensured appropriate disclosure of all related party transactions in the
financial statements.
Narrative related to the Ingenuity business, and presentation of
segmental reporting (including IFRS 5 discontinued operations)
We considered whether narrative related to the Ingenuity business was in line
with our understanding of our contract testing (see revenue section above).
We reviewed judgements on segments and ensured that reportable segments
were disclosed appropriately in accordance with IFRS 8. We ensured that
the presentation of results for THG OnDemand and Luxury in the segmental
reporting note to the financial statements was in line with authoritative
guidance on discontinued operations.
Independent auditor's report to the members of THG PLC (continued)
Key observations communicated to the Audit Committee
There is significant judgment in management’s determination of adjusted items and therefore the clarity of the disclosure
is essential for readers of the financial statements to understand the items.
The disclosures for related party transactions have been made in accordance with ‘IAS 24 Related Party Transactions’.
In 2021 we reported control deficiencies in relation to related party transactions. During the year, management have
implemented controls to remediate the reported deficiency.
Overall we concluded that the Annual Report and Accounts, when taken as a whole, is considered to be Fair, Balanced
and Understandable.
In the prior year, our auditor’s report included a key audit
matter in relation to ‘Valuation of Intangibles’ which
incorporated our risks on acquisition accounting; capitalisation
of platform development costs and impairment of intangibles.
However in the current year, we have only considered
impairment of intangibles and accounting for platform
development costs as key audit matters given the significance
of the judgements taken, impact on the financial statements
and the time and resources allocated to these risk areas by the
audit team.
The Group has made no acquisitions in the current year
(ten in FY21, total spend £0.8bn) and as such this has not been
determined to be a key audit matter in 2022.
Our application of materiality
We apply the concept of materiality in planning and
performing the audit, in evaluating the effect of identified
misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that,
individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users
of the financial statements. Materiality provides a basis for
determining the nature and extent of our audit procedures.
We determined materiality for the Group to be £9.2m (2021:
£8.7m), which is 0.4% (2021: 0.4%) of Group revenue. Based
on our review of analysts’ commentary, we believe that
revenue is the most important benchmark for users of the
financial statements. The increase in materiality is driven by
the increase in revenue which is the basis for materiality.
We determined materiality for the parent company to be
£9.2m (2021: £7.6m), which is 1% of equity (2021: 1% of equity),
capped at Group materiality.
During the course of our audit, we reassessed initial materiality
set at the planning stage of the audit, but did not need to
change the amount nor basis of materiality.
Performance materiality
On the basis of our risk assessments, together with our
assessment of the Group’s overall control environment, our
judgement was that performance materiality was 50% (2021:
50%) of our planning materiality, namely £4.6m (2021: £4.4m).
We have set performance materiality at this percentage due to
the level of errors identified through the course of the 2021 audit.
Audit work of components for the purpose of obtaining audit
coverage over significant financial statement accounts is
undertaken based on a percentage of total performance
materiality. The performance materiality set for each
component is based on the relative scale and risk of the
component to the Group as a whole and our assessment of
the risk of misstatement at that component. In the current year,
the range of performance materiality allocated to components
was £0.9m to £4.0m (2021: £0.7m to £3.8m), excluding
performance materiality for the parent company.
Reporting threshold
An amount below which identified misstatements are
considered as being clearly trivial.
We agreed with the Audit Committee that we would report
to them all uncorrected audit differences in excess of £0.50m
(2021: £0.26m), which is set at 5% (2021: 3%) of planning
materiality, as well as differences below that threshold that,
in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both
the quantitative measures of materiality discussed above and
in light of other relevant qualitative considerations in forming
our opinion.
Other information
The other information comprises the information included
in the annual report, including the strategic report and the
directors’ report, other than the financial statements and our
auditor’s report thereon. The directors are responsible for the
other information contained within the annual report. Our
opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly
stated in this report, we do not express
any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit or otherwise appears
to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based
on the work we have performed, we conclude that there
is a material misstatement of the other information, we are
required to report that fact.
We have nothing to report in this regard. We refer to the
section concerning our identified key audit matter on
Significant Disclosures.
Corporate governance statement
As THG plc have voluntarily complied with the UK Corporate
Governance Code, we are required to review the directors’
statement in relation to going concern, longer-term viability
and that part of the Corporate Governance Statement relating
to the Group and company’s compliance with the provisions
of the UK Corporate Governance Code specified for
our review.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent
167 168
Annual Report 2022
with the financial statements or our knowledge obtained
during the audit:
• Directors’ statement with regards to the appropriateness
of adopting the going concern basis of accounting and
any material uncertainties identified set out on page 93;
• Directors’ explanation as to its assessment of the
company’s prospects, the period this assessment covers
and why the period is appropriate set out on page 93;
• Directors’ statement on fair, balanced and understandable
set out on page 127;
• Board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks set out on
pages 86-87;
• The section of the Annual Report and Accounts that
describes the review of effectiveness of risk management
and internal control systems set out on page 83; and;
• The section describing the work of the Audit Committee
and Risk Committee set out on page 123 and 130.
Opinions on other matters prescribed
by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
• the information given in the strategic report and the
directors’ report for the financial year for which the
financial statements are prepared is consistent with
the financial statements and those reports have
been prepared in accordance with applicable legal
requirements;
• the information about internal control and risk
management systems in relation to financial reporting
processes and about share capital structures, given in
compliance with rules 7.2.5 and 7.2.6 in the Disclosure
Rules and Transparency Rules sourcebook made
by the Financial Conduct Authority (the FCA Rules),
is consistent with the financial statements and has
been prepared in accordance with applicable legal
requirements; and
• information about the company’s corporate governance
statement and practices and about its administrative,
management and supervisory bodies and their
committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of
the FCA Rules.
Matters on which we are
required to report by exception
In the light of the knowledge and understanding of the Group
and the parent company and its environment obtained
in the course of the audit, we have not identified material
misstatements in:
• the strategic report or the directors’ report; or
• the information about internal control and risk
management systems in relation to financial reporting
processes and about share capital structures, given in
compliance with rules 7.2.5 and 7.2.6 of the FCA Rules.
We have nothing to report in respect of the following matters
in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent company financial statements and the part of
the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified
by law are not made;
• we have not received all the information and
explanations we require for our audit; or
• a Corporate Governance Statement has not been
prepared by the company.
Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement set out on page 103, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to
enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group and company’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate
the Group or the company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the
audit of the financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
Independent auditor's report to the members of THG PLC (continued)
Explanation as to what extent
the audit was considered
capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in
line with our responsibilities, outlined above, to detect
irregularities, including fraud. The risk of not detecting a
material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion. The extent to
which our procedures are capable of detecting irregularities,
including fraud is detailed below.
However, the primary responsibility for the prevention
and detection of fraud rests with both those charged with
governance of the company and management.
• We obtained an understanding of the legal and
regulatory frameworks that are applicable to the Group
and determined that the most significant are those that
relate to the reporting framework (IFRS, Companies
Act 2006, the UK Corporate Governance Code, and
the Listing Rules of the UK Listing Authority) and the
relevant tax compliance regulations in the jurisdictions
in which THG PLC operates. In addition, we concluded
that there are certain significant laws and regulations
that may have an effect on the determination of the
amounts and disclosures in the financial statements
and those laws and regulations relating to health and
safety, employee matters, environmental, and bribery and
corruption practices.
• We understood how THG PLC is complying with those
frameworks by making enquiries of management,
internal audit, those responsible for legal and
compliance procedures and the Company Secretary. We
corroborated our enquiries through our review of Board
minutes, internal audit reports and papers provided to
the Audit and Risk Committee.
• We assessed the susceptibility of the Group’s financial
statements to material misstatement, including how
fraud might occur. We identified fraud risks in our
work on adjusted items and revenue recognition and
performed specific procedures which were responsive to
the identified fraud risks.
• Based on this understanding we designed our audit
procedures to identify non-compliance with such laws
and regulations. Our procedures involved journal entry
testing, with a focus on manual consolidation journals
and journals indicating large or unusual transactions
based on our understanding of the business; performing
inquiries of internal and external legal counsel; reviewing
material items within the Group’s legal expenses; and
reviewing media coverage of the Group to identify
whether there were matters that had not been brought
to our attention through discussions with management.
In addition, we completed procedures to conclude on
the compliance of the disclosures in the Annual Report
and Accounts with the requirements of the relevant
accounting standards, UK legislation and the UK
Corporate Governance Code 2018. We also engaged
EY forensics specialists to assist with the performance of
our procedures around compliance with applicable laws
and regulations.
A further description of our responsibilities for the audit
of the financial statements is located on the
Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Other matters we are required
to address
• Following the recommendation from the board, we were
appointed by the company in 2021 to audit the financial
statements for the year ending 31 December 2022 and
subsequent financial periods.
• The period of total uninterrupted engagement including
previous renewals and reappointments is 11 years,
covering the years ending 31 December 2011 to 31
December 2022.
• The non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the Group or the parent
company and we remain independent of the Group and
the parent company in conducting the audit.
• The audit opinion is consistent with the additional report
to the audit committee.
Use of our report
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the company’s members those matters
we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Karl Havers
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP,
Statutory Auditor
London
17 April 2023
169 170
Annual Report 2022
Non-current liabilities
Borrowings 18
Other financial liabilities 14 4 ,1 8 9 -
Lease liabilities 22 290 ,381 305,8 31
Provisions 19 18,84 0 1 5,623
Deferred tax 21 76,598 73,766
Current liabilities
Contract liability 20
Trade and other payables 17
Borrowings 18
Current tax liability
Lease liabilities 22
Provisions 19
Other financial liabilities 14
Total liabilities 1, 787 ,418 1,6 6 8,07 7
Total equity and liabilities 3 , 0 8 9 ,1 5 7 3,423, 831
31 December
2022
31 December
2021
Note £’000 £’000
Non-current assets
Intangible assets 11 1, 27 5,7 62 1,506,292
Property, plant and equipment 12 .1 36 0,04 1 3 35,620
Right-of-use assets 22 294,309 3 10, 28 2
Investments 1,4 00 1,40 0
Other financial assets 14 21,5 67 -
Current assets
Assets held for sale 12.2 21, 397 -
Inventories 13 373,27 1 466,781
Trade and other receivables 15 264,949 263,929
Other financial assets 14 301 2 ,70 0
Current tax asset 2 ,37 7 -
Cash and cash equivalents 16 47 3,7 83 536,827
Total assets 3 , 0 8 9 ,1 5 7 3,423, 831
Equity
Ordinary shares 23 6,9 03 6,684
Share premium 2 ,024,452 2, 022, 3 11
Merger reserve 615 615
Capital redemption reserve 523 523
Hedging reserve (6,2 2 1 ) (12,96 4 )
Cost of hedging reserve 1 6,7 04 13,694
FX reserve 61, 859 (1,094 )
Retained earnings (803, 096 ) (27 4,015 )
Consolidated statement of comprehensive income for the year ended
31 December 2022
Consolidated statement of financial position as at 31 December 2022
2022 2021
Total Total
Note £’000 £’000
Revenue 2 2,239,229 2 ,1 7 9 , 9 1 0
Cost of sales (1,359,254 ) (1,225,506 )
Gross profit 87 9,97 5 95 4,404
Distribution costs (4 02 ,7 69 ) (429,940 )
Administrative costs (9 72 ,7 7 1 ) (661 ,927 )
Operating loss 3 (495 ,565 )
(137,463 )
Finance income 8 2,359 623
Finance costs 8 (5 6,52 2 ) (49, 44 7 )
Loss before taxation (5 4 9,7 28 ) (186,28 7 )
Income tax credit 9 9,7 7 1 4 8,213
Loss for the financial year (5 39,9 57 ) (138,07 4 )
Other comprehensive (expense) / income
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translating foreign operations, net of tax 62 ,953 (27 2 )
Net gain in cash flow hedges 9,7 53 1 1,391
Total comprehensive expense for the financial year (4 6 7, 2 5 1 ) (126,955 )
Basic and diluted loss per share (£) 26 (0.4 4 0 .1 3
Adjusted EBITDA
2022 2021
Notes £’000 £’000
Operating loss (495,565 )
(137,463 )
Adjustments for:
Share-based payments 7 10 ,73 4 -
Adjusted items - impairment 4 2 75,42 2 55,990
Adjusted items - other 4 7 0,3 57 73,238
Depreciation 12.1,22
Amortisation 11 108,975 9 9,033
Adjusted EBITDA
1
1. Adjusted EBITDA is defined as operating profit before depreciation, amortisation, share-based payments and adjusted items.
The results for the year are derived from continuing activities.
The comprehensive expense is 100% attributable to the owners of the Parent Company.
The financial statements on pages 171-223 were approved by the
Board of Directors on 17 April 2023 and were signed on its behalf by
Damian Sanders
Chief Financial Officer
Registered number: 06539496
171 172
Annual Report 2022
Ordinary
shares
Share
premium
Merger
reserve
Capital
Redemption
reserve
FX
reserve
Hedging
reserve
Cost of
Hedging
reserve
Retained
earnings
Total equity
Note £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Balance at 1 January 2021 6 ,061 1,287 , 1 71 615 52 3 (8 22 ) (18 ,003 ) 7, 3 4 2 (138,361 ) 1,144,526
Loss for the year - - - - - - - (138,07 4 ) (138, 0 7 4 )
Other comprehensive
expense:
Impact of foreign exchange - - - - (272 ) - - - (272 )
Movement on hedging
instruments
Total comprehensive
(expense) / income for
the year
Issue of ordinary share
capital
Deferred tax effect in equity 21 - - - - - - - 2 ,42 0 2,4 20
Balance at 31 December
2021
Balance at 1 January 2022 6,68 4 2, 02 2,3 11 615 523 (1,094 ) (12 ,964 ) 13, 694 (27 4,015 ) 1 ,75 5,75 4
Loss for the year - - - - - - - (5 39,95 7 ) (539,9 57 )
Other comprehensive
income:
Impact of foreign exchange - - - - 62 ,953 - - - 62,9 53
Movement on hedging
instruments
Total comprehensive
income / (expense) for
the year
Issue of ordinary share
capital
Share-based payments 7 - - - - - - - 1 0,73 4 1 0,73 4
Deferred tax effect in equity 21
Balance at 31 December
2022
Consolidated statement of changes in equity for the year ended
31 December 2022
2022 2021
Note £’000 £’000
Cash flows from operating activities before adjusted cash flows
Cash generated from operations 25 8 7, 6 4 2 95,954
Income tax paid (4 ,8 5 7 ) ( 7, 0 9 5 )
Net cash generated from operating activities
before adjusted cash flows
Cash flows relating to adjusted items (4 5 ,0 7 1 ) (65,528 )
Net cash generated from operating activities 3 7, 7 1 4 23 ,331
Cash flows from investing activities
Acquisition of subsidiaries net of cash acquired 10 (5,691 ) (768,490 )
Purchase of investments - (1, 400 )
Purchase of property, plant and equipment (9 4,8 54 ) (111 ,553 )
Purchase of intangible assets (81, 56 4 ) ( 7 7, 6 2 0 )
Interest received 8 2 ,359 323
Net cash used in investing activities (1 7 9,7 50 ) (9 5 8 ,74 0 )
Cash flows from financing activities
Proceeds from issuance of ordinary shares net of fees (73 ) 760, 23 0
Interest paid ( 2 7, 9 2 3 ) (25,359 )
Proceeds from bank borrowings 156, 000 -
Repayment of lease liabilities 22 (4 9,0 12 ) (3 6,2 16 )
Net cash flow from financing activities 78,992 698,655
Net decrease in cash and cash equivalents (63 ,0 44 ) (236, 754 )
Cash and cash equivalents at the beginning of the year 536, 827 7 73,58 1
Cash and cash equivalents at the end of the year 16 4 73 ,78 3 536,827
Consolidated statement of cash flows for the year ended
31 December 2022
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189 190
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201 202
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Notes to the consolidated financial statements (continued)
217 218
Notes to the consolidated financial statements (continued)
219 220
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Notes to the consolidated financial statements (continued)
221 222
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Company only
financial statements
224223
Annual Report 2022
2022 2021
Note £’000 £’000
Non-current assets
Investments 4 524,580 508,846
524,580 508,846
Current assets
Receivables 5 1,612,636 1,406,262
Cash 56,267 282,278
1,668,903 1,688,540
Payables: amounts falling due within one year 6 (8,710) (3,147)
Net current assets 1,6 60,19 3 1,685,393
Total assets less current liabilities 2 ,18 4,7 73 2,194,239
Net assets 2 ,18 4,7 73 2,194,239
Capital and reserves
Called up share capital 7 6,903 6,684
Share premium 2,024,452 2,022,311
Merger reserve 615 615
Capital redemption reserve 523 523
Loss for the year (22,560) (19,328)
Retained earnings 174,840 183,434
Total shareholders’ funds 2,18 4,7 73 2,194,239
Damian Sanders
Chief Financial Officer
Registered number: 06539496
Company statement of financial position as at 31 December 2022 Company statement of changes in equity for the year ended
31 December 2022
Ordinary
shares
£'000
Share
premium
£'000
Merger
reserve
£'000
Capital
Redemption Reserve
£'000
Retained
earnings
£'000
Total equity
£'000
Balance at 1 January 2021 6,061 1,287,171 615 523 183,434 1, 4 7 7, 8 0 4
Loss for the year - - - - (19,328) (19,328)
Issue of ordinary share capital 623 735,140 - - - 735,763
Balance at 31 December 2021 6,684 2,022,311 615 523 1 64,1 06 2 ,194,239
Balance at 1 January 2022 6,684 2,022,311 615 523 1 6 4,106 2 ,194 ,239
Loss for the year - - - - (22,560) (22,560)
Issue of ordinary share capital 219 2 ,141 - - - 2,360
Share-based payment - - - - 10,734 10,734
Balance at 31 December 2022 6,903 2,024,452 615 523 152,280 2 ,184,7 73
The financial statements on pages 225-230 were approved by the Board of Directors on 17 April 2023 and were
signed on its behalf by:
225 226
Annual Report 2022
Notes to the Company financial statements
1. Accounting policies
The principal accounting policies have been applied in accordance with ‘Financial Reporting Standard 101 Reduced
Disclosure Framework’ (FRS 101) and are detailed below. The policies have been applied consistently throughout both the
current and preceding year.
a. Basis of preparation
The Company financial statements have been prepared in accordance with United Kingdom’s Generally Accepted
Accounting Practice, including Financial Reporting Standard 101 Reduced Disclosure Framework (‘FRS 101’), and in
accordance with the provisions of the Companies Act 2006. The Company has taken advantage of section 408 of the
Companies Act 2006 not to present the parent company profit and loss account. The loss for the financial year in the
financial statements of the Company is £22.6m (2021: £19.3m). The financial statements have been prepared on the
historical cost basis.
In accordance with FRS 101, the Company has taken advantage of the following disclosure exemptions:
• Company cash flow statement and related notes
• Disclosures required by IFRS 2 Share-based payments
• Disclosures required by IFRS 7 Financial Instrument Disclosures
• Disclosure of related party transactions
There have been no new or amended accounting standards or interpretations adopted during the year that have had a
significant impact on the company’s financial statements.
There are no standards, interpretations or amendments to IFRS that have been issued but are not yet effective that are
expected to have a material impact on the Company’s financial statements.
b. Taxation and deferred taxation
Current tax including UK Corporation Tax is provided at amounts expected to be paid or recovered using
the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred taxation is provided in full on timing differences that result in an obligation at
the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates
expected to apply when they crystallise based on current tax rates and law.
Temporary differences arise from the inclusion of items of income and expenditure in taxation computations in periods
different from those in which they are included in the financial statements. Deferred tax assets are recognised to the extent
that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.
c. Financial instruments
Financial assets and financial liabilities are recognised on the Company’s balance sheet when
the Company becomes a party to the contractual provisions of the instrument.
The most significant financial asset relates to an intercompany debtor, representing funding
requirements within the Group. Management have considered all aspects of IFRS 9 with respect to
recognising the appropriate value of these financial instruments at the balance sheet date, including
credit risk, and have concluded that this has not adversely changed since initial recognition.
d. Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements
entered. An equity instrument is any contract that evidences a residual interest in the assets of the Company after
deducting all its liabilities.
e. Investments in subsidiaries
Investments in subsidiaries are held at cost, less any provision for impairment. Where equity settled share-based
payments are granted to the employees of subsidiary companies, the fair value of the award is treated as a capital
contribution by the Company and the investments in subsidiaries are adjusted to reflect this capital contribution.
f. Share-based payments
The Group operates share-based compensation plans, under which the Group receives services from employees
as consideration for equity instruments (options) of the Company. The fair value of the employee services received
in exchange for the grant of the equity instruments is recognised as an increase to investments in the statement of
comprehensive income. The total charge is recognised over the vesting period, which is the period over which all the
specified vesting conditions are to be satisfied. At the end of each reporting period, the Group revises its estimates of the
number of equity instruments that are expected to vest based on the non-market vesting conditions along with taking
account of any equity instruments that may have been cancelled or modified in the period. It recognises the impact of the
revision to original estimates, if any, in the statement of comprehensive income with a corresponding adjustment to equity.
Note 7 in the consolidated financial statements details the schemes in place.
g. Critical accounting judgements and key sources of estimation uncertainty
Critical accounting judgements
Impairment of investments
The carrying amounts of the Company’s investments are reviewed at each reporting date to determine whether there
is any indication of impairment in accordance with the accounting policy set out in note 1 of the consolidated financial
statements. The Company considers impairment of its investments in subsidiaries by estimating the recoverable amounts
of its investments. In performing this assessment, management have considered the cashflows at a group consolidated
level, consistent with the impairment review for the Group's goodwill, and concluded that the forecasts support the carrying
value of the company's investments. Note 11 in the consolidated financial statements details the assumptions used together
with an analysis of the sensitivity to changes in key assumptions.
Key sources of estimation uncertainty
Recoverability of intercompany debtors
The Company uses estimates to determine the recoverability of amounts due from its subsidiaries. Under IFRS 9, the
carrying amounts of receivables from other Group subsidiaries are required to be assessed for recoverability on a forward-
looking basis through the recognition of an expected credit loss (ECL) provision. This requires the estimation of expected
loss at default (ELD) and probability of default (PD) to compute the ECL, which is deemed to reflect the irrecoverability of
intercompany debtors.
In calculating the ECL, management elect to use a loss percentage which is in line with market practice in the UK and
EU. An assessment of the Groups credit rating is utilised as this is the most accurate and reflective probability of default,
specific to the THG entities.
227 228
Annual Report 2022
2. Employee costs and numbers
5. Receivables
4. Fixed asset investments
Fixed asset investments comprise investments in subsidiary undertakings.
3. Auditor remuneration
Amounts paid to the Company’s auditors are disclosed in note 5 of the Group’s consolidated financial statements.
2022 2021
£'000 £'000
Short term employee benefits 270 50
Social security costs 25 3
Pension costs 2 -
297 53
2022 2021
£'000 £'000
Trade and other receivables 2,480 596
Amounts owed from Group undertakings 1,575,903 1,373,336
Unpaid share capital 26,919 27,026
Corporation tax asset 4,741 4,687
Other taxation and social security 1,229 379
Prepayments and accrued income 1,362 238
1,612,634 1,406,262
2022 2021
£'000 £'000
At 1 January 508,846 508,846
Additions 15,734 -
At 31 December 524,580 508,846
The average number of employees during the year was 2 (2021: 2).
THG PLC is a public company limited by shares and incorporated in England and Wales. It has a standard listing on the
London Stock Exchange and is the holding company of the Group. The Company has ten classes of shares; Ordinary
Shares of £0.005 each, all of which are fully paid; D1 Shares of £0.005 each; D2 Shares of £1 each, all of which are fully paid;
E Shares of £0.005 each; F Shares of £0.005 each; G Shares of £0.005 each; H Shares of £0.005 each; the Special Share of
£1, which is fully paid up; Deferred 1 Shares of £0.005 each; and Deferred 2 Shares of £0.005 each. As at 31 December 2022,
the Company’s issued share capital comprised:
Class
2022 Number Nominal value £ each
Ordinary Shares
1,265,377,243 0.005
D1 Shares
56,082,651 0.005
D2 Shares
1 7,741 1
E Shares
48,995,797 0.005
F Shares
27,122 ,2 8 7 0.005
G Shares
17,494,614 0.005
Special Share
1 1
Deferred 1 Shares
313,257 0.005
Deferred 2 Shares
21,563,860 0.005
1,436,967,451
During the financial year ending 31 December 2022 the following took place. The conversion of shares are in respect
of the employee share scheme:
6. Payables: amounts falling due within one year
7. Share capital and reserves
2022 2021
£'000 £'000
Trade creditors 1,900 919
Accruals and deferred income 6,810 2,228
8,710 3,147
Notes to the Company financial statements (continued)
Amounts owed by Group undertakings are unsecured, non-interest bearing and repayable on demand. The current amount includes amounts of £1,575.9m
(2021: £1,373.3m) due on demand but expected to be settled after 1 year.
At 31 December 2022, there were 160,809,675 fully vested, but partly paid and unlisted Shares (31 Dec 2021: 161,439,766). The average amount of unpaid share
capital per fully vested but partly-paid and unlisted Share is £0.17 (2021: £0.16) representing a receivable to the Group of £26.9m (2021: £27.0m). The movement
in the year is all due to certain fully vested but partly paid and unlisted Shares being paid-up and converted to Ordinary Shares.
(xxv) 34,454 Ordinary Shares were converted from 34,454 E Shares;
(xxvi) 88,000 Ordinary Shares were converted from 88,000 E Shares;
(xxvii) 22,953 Ordinary Shares were converted from 22,953 E Shares;
(xxviii) 1,606 Ordinary Shares were converted from 1,606 E Shares;
(xxix) 6,399 Ordinary Shares were converted from 6,399 E Shares;
(xxx) 44,909 Ordinary Shares were converted from 21,144 E Shares, 8,000 F Shares and 15,765 G Shares;
(xxxi) 71 D2 Shares were subdivided into 14,200 D2 shares of £0.005 each, 13,169 of which converted into 13,169 Ordinary Shares and 1,031 of which were
reclassified as Deferred 1 Shares;
(xxxii) 1,000 Ordinary Shares were converted from 1,000 E Shares;
(xxxiii) 15,530 Ordinary Shares were converted from 6,208 F Shares and 9,322 G Shares;
(xxxiv) 75,000 Ordinary Shares were converted from 75,000 G Shares;
(xxxv) 1,000 Ordinary Shares were converted from 1,000 E Shares;
(xxxvi) 12,000 Ordinary Shares were converted from 12,000 G Shares;
(xxxvii) 65,000 Ordinary Shares were converted from 65,000 E Shares;
(xxxviii) 24,806,893 Ordinary Shares were issued for a total consideration of £911,722 (note 7);
(xxxix) 1,000 Ordinary Shares were converted from 1,000 E Shares;
(xl) 77,175 Ordinary Shares were converted from 16,118 E Shares, 30,497 F Shares and 30,560 G Shares;
(xli) 12,168 Ordinary Shares were converted from 4,193 F Shares and 7,975 G Shares;
(xlii) 19,074,902 Ordinary Shares were issued for a total consideration of £1,521,117 (note 7);
(xliii) 19,753 Ordinary Shares were converted from 10,572 F Shares and 9,181 G Shares;
(xliv) 17,529 Ordinary Shares were converted from 7,048 F Shares and 10,481 G Shares;
(xlv) 52,026 Ordinary Shares were converted from 8,068 E Shares, 17,620 F Shares and 26,338 G Shares;
(xlvi) 26,292 Ordinary Shares were converted from 10,572 F Shares and 15,720 G Shares;
(xlvii) 6,538 Ordinary Shares were converted from 2,643 F Shares and 3,895 G Shares; and
(xlviii) 4,000 Ordinary Shares were converted from 4,000 E Shares.
8. Related party transactions
The Company has taken exemption under FRS 101 not to disclose transactions with wholly owned subsidiary companies.
229 230
Annual Report 2022
Glossary
Alternative performance measures (“APMs”)
The Group tracks a number of alternative performance measures in managing its business, which are not defined or
specified under the requirements of IFRS because they exclude amounts that are included in, or include amounts that are
excluded from, the most directly comparable measure calculated and presented in accordance with IFRS, or are calculated
using financial measures that are not calculated in accordance with IFRS.
The Group believes that these alternative performance measures, which are not considered to be a substitute for or
superior to IFRS measures, provide stakeholders with additional helpful information on the performance of the business.
These alternative performance measures are consistent with how the business performance is planned and reported within
the internal management reporting to the Board.
These alternative performance measures should be viewed as supplemental to, but not as a substitute for, measures
presented in the consolidated financial information relating to the Group, which are prepared in accordance with IFRS.
The Group believes that these alternative performance measures are useful indicators of its performance. However, they
may not be comparable with similarly-titled measures reported by other companies due to differences in the way they are
calculated. Profit-related APMs frequently exclude significant recurring business transactions (e.g., restructuring charges
and acquisition-related costs) that impact financial performance and cash flows.
The Audit Committee have reviewed the overall presentation of APMs to ensure that these are not given undue
prominence, challenged the nature and amount of adjusting items and evaluated the reconciliations used by management.
In determining whether an item should be presented as an allowable adjustment to IFRS measures, the Group considers
items which are significant either because of their size or their nature, and which are non-recurring. For an item to be
considered as an allowable adjustment to IFRS measures, it must initially meet at least one of the following criteria:
• It is a significant item.
• It has been directly incurred as a result of acquisition related restructuring and integration costs, transportation,
delivery or fulfilment costs in relation to Covid-19 or as part of the outcome of the strategic review or divisional
reorganisation.
• It is unusual in nature or linked to a one-off agreement signed outside of the normal course of business.
Purpose
The Group uses APMs to improve the comparability of information between reporting periods, either by adjusting for
uncontrollable factors or special items which impact upon IFRS measures.
Their use is driven by characteristics particularly relevant to THG Group:
• Adjustments to operating profit – the Group has a significant non-current asset base and consequently incurs a high
proportion of depreciation and amortisation. APMs are used to provide adjusted measures for users of the financial
statements to evaluate our operating performance.
• Acquisition related activity - the Group is in a growth phase in its lifecycle and has made several acquisitions in the
previous reporting periods. Consequently, a high volume of transaction, restructuring and financing costs are incurred
within the Group which do not reflect its underlying business. APMs are used to provide an adjusted measure for users
of the financial statements to consider performance after such items.
• In 2022 following the strategic review, some non-core categories and territories were discontinued. These areas do not
meet the definition of a component to be disclosed under IFRS 5; Assets held for sale and discontinued operations as
a discontinued operation on the face of the consolidated income statement and as such has been recognised as an
APM in 2022 to provided information to the users of the financial statements of the ongoing operations.
232
231
Annual Report 2022
APM
Closest
equivalent
IFRS measure
Adjustments to reconcile to
primary statements
Purpose
Adjusted Gross profit Gross profit
• Depreciation
• Amortisation
See the Chief Financial
Officer review footnote 1
for a reconciliation.
To show gross profit before depreciation and
amortisation charged due to its nature to aid
comparability.
Adjusted distribution
costs
Distribution
costs
• Adjusted items
• Depreciation and
amortisation
See the Chief Financial
Officer review footnote 1
for a reconciliation.
To show distribution costs before adjusted items
and depreciation and amortisation charged due
to their nature to aid comparability.
Adjusted
administrative
expenses
Administrative
expenses
• Adjusted items
• Depreciation and
amortisation
• SaaS costs arising from
change in accounting policy
• Share-based payments
See the Chief Financial
Officer review footnote 1
for a reconciliation.
To show administrative expenses before adjusted
items and depreciation and amortisation charged
due to their nature to aid comparability.
Adjusted EBITDA
Operating
profit
• Adjusted items
• Depreciation and
amortisation
• Share-based payments
See the Chief Financial Officer
review for a reconciliation.
EBITDA is a useful measure for investors
because it is a measure closely tracked by
management to evaluate THGs operating
performance and to make financial, strategic and
operating decisions and may help investors to
understand and evaluate, in the same manner
as management, the underlying trends in
operational performance on a comparable basis
year on year.
Share-based payment costs are added back,
following the launch of the share-based payment
scheme in the year and management consider
these to be outside of the underlying day-to-
day operations. Given the material size of these
charges they are removed from underlying
Adjusted EBITDA.
APM
Closest
equivalent
IFRS measure
Adjustments to reconcile to
primary statements
Purpose
Adjusted EBITDA
(continuing)
Operating
profit
• Adjusted items
• Depreciation and
amortisation
• Share-based payments
• SaaS costs arising from
change in accounting
policy
• EBITDA from discontinued
categories
See the Chief Financial Officer
review for a reconciliation.
EBITDA is a useful measure for investors
because it is a measure closely tracked by
management to evaluate THGs operating
performance and to make financial, strategic and
operating decisions and may help investors to
understand and evaluate, in the same manner
as management, the underlying trends in
operational performance on a comparable basis
year on year.
In 2022 an additional measure has been
recognised to show the impact of the operations
that will continue in 2023.
Net (debt) / cash
before lease
liabilities
Cash
• Loans and other
borrowings
• Foreign exchange
(Retranslate debt balance
at swap rate where hedged
by foreign exchange
derivatives)
• Lease liabilities
See the Chief Financial Officer
review for a reconciliation.
To show the cash balance after the deduction
of the loans and other borrowings balances
but before lease liabilities are deducted and
after retranslation of debt balance at swap rate.
This measure is tracked by management when
reviewing liquidity and the indebtedness of the
Group which is then used to drive any strategic
or acquisition related decisions.
Net debt Cash
• Loans and other
borrowings
• Foreign exchange
(Retranslate debt balance
at swap rate where hedged
by foreign exchange
derivatives)
See the Chief Financial Officer
review for a reconciliation.
To show the cash balance after the deduction
of the loans and other borrowings balances and
after retranslation of debt balance at swap rate.
This measure is tracked by management when
reviewing liquidity and the indebtedness of the
Group which is then used to drive any strategic
or acquisition related decisions.
233 234
Annual Report 2022
The definitions set out below apply throughout this document, unless the context requires otherwise.
2021 Annual Report means the Annual Report and Accounts of the Company in respect of the financial year ending 31 December 2021
2022 AGM means the annual general meeting of the Company held on 10 June 2022
2030 Sustainability Strategy
means the Group’s Sustainability Strategy, THG x Planet Earth, for a better, sustainable future with targets centred
around three key priorities: (i) protecting climate and nature; (ii) strengthening our supply chain and circularity;
and (iii) empowering people and communities
Active Customers means customers who have purchased at least once in the financial year ending 31 December 2022
Adjusted EBITDA
means the non-GAAP measure which is defined as Earnings Before Interest, Taxes, Depreciation, Amortisation,
share-based payments, SaaS change in accounting policy and adjusting items as detailed in note 4 of the
financial statements contained within this Annual Report
Adjusted EBITDA (continuing)
means the non-GAAP measure which is defined as Earnings Before Interest, Taxes, Depreciation, Amortisation,
share-based payments, SaaS change in accounting policy, adjusting items and removal of the EBITDA from those
operations within the Group that are no longer continuing
Admission
means the admission of the Ordinary Shares to both the standard listing segment of the Official List of the FCA
and the London Stock Exchange’s main market for listed securities, which took place on or around 16 September
2020
AGM means the annual general meeting of the Company that will be held on 21 June 2023
Annual Report
means this Annual Report and Accounts of the Company in respect of the financial year ending 31 December
2022
API means Application Programming Interface
Articles of Association means the Articles of Association of the Company, as adopted by special resolution on 9 September 2020
Autostore means AutoStore AS, a warehouse robotics company
B2B means business to business
Bentley Laboratories
means Bentley Laboratories LLC, an innovative developer and manufacturer of prestige skincare and haircare
products that was acquired by THG on 15 June 2021
Board means the board of directors of the Company
Board Committees
means the Company’s Board-constituted committees comprising the Audit Committee, the Risk Committee,
the Remuneration Committee, the Nomination Committee, the Related Party Committee and the Sustainability
Committee
Brexit means the UK’s decision to leave the European Union following the referendum on 23 June 2016
Brighter Foods
means Brighter Foods Limited, a specialist developer and manufacturer of snack bars that was acquired by THG
on 11 May 2021
Carbon Neutrality means achieving a net-zero release of greenhouse gas emissions (including carbon dioxide) into the atmosphere
Chair or Independent Chair
means Charles Allen, Lord Allen of Kensington, CBE, independent non-executive chair of the Company, appointed
on 22 March 2022
Chief Executive Officer or CEO means Matthew Moulding, the Company’s Chief Executive Officer and co-founder
Chief Financial Officer or CFO means Damian Sanders, the Company’s Chief Financial Officer
Chief Operating Officer or COO means John Gallemore, the Company’s Chief Operating Officer and co-founder
Code means The UK Corporate Governance Code (July 2018), published by the FRC
Companies Act means the Companies Act 2006 (as amended from time to time)
Company
means THG PLC , a public limited company incorporated in England and Wales with registered number 06539496,
whose registered office is at Icon 1, 7-9 Sunbank Lane, Ringway, Altrincham, United Kingdom, WA15 0AF
Company Secretary means James Pochin, the Company Secretary of THG PLC
Constant currency
means without taking into account fluctuations in the exchange rate; therefore showing the figures as if the
exchange rate remained constant
Covid-19
means the disease caused by Severe Acute Respiratory Syndrome Coronavirus 2, responsible for the global
pandemic that has impacted the Group’s operations
CRM means Customer Relationship Management
Cult Beauty
means Cult Beauty Limited, the UK-based online beauty retailer of prestige and emerging independent brands
that was acquired by THG on 3 August 2021
CX means customer experience
D&I means diversity and inclusion
D1 Shares
means the D ordinary shares of £0.005 each in the capital of the Company, having the rights and being subject to
the restrictions set out in the Articles of Association
D2 Shares
means the D ordinary shares of £1.00 each in the capital of the Company, having the rights and being subject to
the restrictions set out in the Articles of Association
D2C means direct to customer
Deferred 1 Shares
means the deferred 1 shares of £0.005 each in the capital of the Company, having the rights and being subject to
the restrictions set out in the Articles of Association
Deferred 2 Shares
means the deferred 2 shares of £0.005 each in the capital of the Company, having the rights and being subject to
the restrictions set out in the Articles of Association
Dermstore
means Dermstore LLC, the pure play online prestige skincare business that was acquired by THG on 2 February
2021
Directors means the directors of the Company from time to time and “Director” means any one of them
Disclosure Guidance and
Transparency Rules or DTRs
means the disclosure guidance and transparency rules made by the FCA under Part VI of the Financial Services
and Markets Act 2000 (as amended from time to time)
Division
means business units within the Group. The Group has six divisions, THG Beauty, THG Nutrition, THG Ingenuity,
THG OnDemand, THG Luxury and THG Experience.
Divisional Reorganisation Committee
means the committee, formerly named the Separation Committee, established to oversee the co-ordination,
delivery and execution of the reorganisation of the THG corporate structure, specifically regarding the formation
of six sub-groups relating to THG Beauty, THG Nutrition, THG Luxury, THG OnDemand, THG Ingenuity and THG
Experience
EBITDA
means the non-GAAP measure which is defined as Earnings Before Interest, Taxes, Depreciation and
Amortisation
EBT means earnings before tax
eCRM means electronic customer relationship management
Employee Incentive Plan
means the employee incentive plan which was put in place during the 2022 reporting period and under which
Ordinary Share awards will be made to certain key employees below the level of the Executive Leadership Team
ERM means Enterprise Risk Management
ESG
means environmental, social and corporate governance factors which are non-financial and are used in assessing
the sustainability and societal impact of the Company and its value chain
EU means the European Union
E Shares
means the E ordinary shares of £0.005 each in the capital of the Company, having the rights and being subject to
the restrictions set out in the Articles of Association
Executive Leadership Team means, collectively, those individuals holding executive management positions within the Company
Executive Directors
means the executive directors of the Company from time to time, being the Chief Executive Officer, the Chief
Financial Officer and the Chief Operating Officer at the date of this Annual Report, and “Executive Director”
means any one of them
EY or External Auditor means Ernst & Young LLP, the Group’s statutory auditor and adviser in respect of non-audit services
FCA means the Financial Conduct Authority
FDA means the Food and Drug Administration, a US federal agency of the Department of Health and Human Services
FIR/ST means fulfilment, inventory, retrieval and storage technology
FMCG means fast moving consumer goods
FRC means the Financial Reporting Council
235 236
Annual Report 2022
F Shares
means the F ordinary shares of £0.005 each in the capital of the Company, having the rights and being subject to
the restrictions set out in the Articles of Association
GAAP means Generally Accepted Accounting Principles
GDPR means the General Data Protection Regulation (EU) 2016/679
General Counsel means James Pochin, the General Counsel of the Company
GHG means greenhouse gases
GMV means Gross Merchandise Value
Group or THG means the Company and its subsidiaries and subsidiary undertakings from time to time
G Shares
means the G ordinary shares of £0.005 each in the capital of the Company, having the rights and being subject to
the restrictions set out in the Articles of Association
H1 2023 means the six-month period from 1 January 2023 to 30 June 2023
H Shares
means the H ordinary shares of £0.005 each in the capital of the Company, having the rights and being subject to
the restrictions set out in the Articles of Association
IAS means International Accounting Standards
IFRS means International Financial Reporting Standards
IPO means the initial public offering of Ordinary Shares by the Company in September 2020
KPI means key performance indicator
Listing Rules
means the Listing Rules made by the FCA under Part VI of the Financial Services and Markets Act 2000 (as
amended from time to time)
London Stock Exchange means the London Stock Exchange PLC or its successor
LTIP means any long-term incentive plan operated by the Company from time to time
M&A means mergers and acquisitions
NEDs means the Non-Executive Directors of the Company and “NED” means any one of them
Notice of Meeting means the notice of AGM circulated to Shareholders on or around the date of posting of this Annual Report
NPD means new product development
Ordinary Shares
means the voting ordinary shares of £0.005 each in the capital of the Company, having the rights and being
subject to the restrictions set out in the Articles of Association
Perricone means Perricone MD, the US prestige skincare brand that was acquired by THG on 29 September 2020
Premium Listing
means a listing where the issuer is required to comply with Chapter 6 of the Listing Rules and the other
requirements in the Listing Rules that are expressed to apply to securities with a premium listing
Propco Group
means Moulding Capital Limited (formerly Kingsmead Holdco Limited), a company incorporated in Guernsey
(registered no. 51762), whose registered office is at Sarnia House, Le Truchot, St Peter Port, Guernsey, GY1 1GR
(“Propco”), and its subsidiaries from time to time, which together hold certain property assets that are used or
occupied by THG under leases between the relevant Group company and the relevant subsidiaries of Propco
Propco Transaction
means the sale of the Propco Group prior to Admission to Moulding Group Limited (formerly FIC Holdings Ltd),
which is wholly owned by Matthew Moulding, the CEO
RCF means revolving credit facility
Regulations means the Companies (Miscellaneous Reporting) Regulations 2018 (as amended from time to time)
Related Party Transaction
means a transaction, arrangement or relationship to which the Company, or any of its subsidiaries, will be a
participant and where any related party has a direct or indirect interest
Remuneration Policy
means the Shareholder-approved policy which sets out the remuneration arrangements for Directors (as
amended from time to time)
SaaS means software as a service
SBTi
means the Science Based Targets initiative, the global body enabling businesses to set emissions reduction
targets in line with climate science
Section 172
means section 172 of the Companies Act which relates to the duty of a company’s directors to promote the
success of the company
SEDEX means Supplier Ethical Data Exchange
Senior Management means the Executive Leadership Team and its direct reports
Shareholder means a holder of Ordinary Shares
Shares
means together the Ordinary Shares, D1 Shares, D2 Shares, E Shares, F Shares, G Shares, H Shares, Deferred 1
Shares, Deferred 2 Shares and the Special Share or any, or a combination, of each as the context requires
SID
means the Board’s senior independent NED, currently Dean Moore who was appointed on an interim basis on 24
January 2023
Softbank means SB Management Limited, a subsidiary of SoftBank Group Corp.
Special Share
means the “special” share of £1.00 in the capital of the Company, having the rights and being subject to the
restrictions set out in the Articles of Association
Standard Listing means a standard listing under Chapter 14 of the Listing Rules
TCFD
means the Task Force on Climate-Related Financial Disclosures, a framework to help public companies and other
organizations more effectively disclose climate-related risks and opportunities through their existing reporting
processes
THG Beauty means a key division and market of the Company relating to beauty products, commerce and distribution
THG Digital means the Company’s end-to-end digital brand services
THG Eco means the Company’s sustainability solutions division
THG Experience means a key division and market of the Company relating to influencer marketing and commerce
THG Ingenuity means a platform created and used by the Company to achieve global e-commerce competitive advantage
THG Luxury means the luxury fashion retail division of the Company
THG Media means the Company's digital content, licensing, social and retail media proposition
THG Nutrition means a key division and market of the Company relating to nutritional products, commerce and distribution
THG OnDemand means the division offering personalisation and customisation to a range of consumers via online platforms
THG Procure means our internally developed procurement system
THG Studios means a division of the Company which produces digital content
THG Technology means a key division and market of the Company
THG Values means the Company’s values, namely leadership, innovation, decisiveness, ambition and collaboration
WMS means warehouse management systems
YoY means year on year
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Annual Report 2022