Shares of THG (LON: THG) experienced a notable climb on Thursday morning following the release of its preliminary full-year 2025 results, showcasing significant revenue growth and a return to profitability.
The FTSE 250 consumer-focused group’s performance, coupled with an optimistic outlook for 2026, has buoyed market sentiment.
THG reported a profit after tax of £54.1 million, a substantial turnaround from the £326.1 million loss in FY24. Revenue growth, particularly in the latter half of the year, fueled the positive results, with a full-year increase of 2.3%. The company exited Q4 2025 with a revenue growth of 7.2%, and that momentum is continuing into Q1 2026.
Adjusted EBITDA for FY25 reached £76.6 million, exceeding both company guidance and consensus estimates. This represents a notable improvement in operational efficiency and profitability for the group. The company’s operating profit of £8.1 million stands in stark contrast to the prior year’s loss of £147.9 million.
The balance sheet was significantly deleveraged, with gross debt reduction of £162 million and £103 million in cash proceeds from the sale of Claremont Ingredients. Debt facilities have been extended to December 2029, providing financial stability.
The company anticipates a free cash flow generation between £25 million and £50 million for FY26. Net debt is expected to further reduce to between £110 million and £130 million before any strategic asset disposals, boosted by VAT repayments.
Driver Breakdown:
- THG Beauty Performance: Strong Q4 growth driven by Lookfantastic in the UK and Ireland, along with successful new brand launches.
- THG Nutrition Expansion: Growth across all quarters, fueled by online resurgence and retail footprint expansion into over 40,000 doors.
- Strategic Simplification: Completion of the THG Ingenuity demerger, unlocking cash generation potential.
AskTraders Takeaway:
The strong financial performance, coupled with positive guidance, suggests a potential for continued share price appreciation. Markets will closely monitor the company’s ability to sustain its growth trajectory and manage its debt levels.
CEO Matthew Moulding stated, “Today’s results reflect the strength of our business models and the exceptional execution by the team,” reinforcing the company’s strategic focus on disciplined investment and customer satisfaction.
The ongoing case with HMRC regarding VAT treatment on protein powders presents a potential upside, with a successful claim potentially resulting in a cash payment of approximately £78 million. This development adds another layer of optimism to THG’s financial outlook.
Analyst Summary: Bull and Bear Cases
Bull Case:
- Reported a significant turnaround to a £54.1 million profit after tax from a £326.1 million loss in the previous year.
- Exceeded guidance with an adjusted EBITDA of £76.6 million, indicating improved operational efficiency.
- Strengthened the balance sheet through significant debt reduction (£162 million) and extended debt facilities to 2029.
- Strong growth momentum in key divisions, THG Beauty and THG Nutrition, continuing into Q1 2026.
- Positive free cash flow generation of £25-£50 million is anticipated for FY26.
- A potential cash windfall of approximately £78 million from a successful VAT claim with HMRC.
Bear Case:
- The ability to sustain the current high-growth trajectory and momentum remains a key challenge to monitor.
- Continued effective management of debt levels is crucial for long-term financial stability, despite recent improvements.
- The positive outcome of the £78 million VAT case with HMRC is not guaranteed and remains a financial uncertainty.
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