THG confirms stronger H1 growth as Beauty and Nutrition drive EBITDA recovery

THG PLC (LSE: THG) has reported approximately 6.5% revenue growth for the first half of 2026, accelerating from a 2.5% decline in the corresponding period and supporting expectations for the company’s strongest first-half free cash flow since 2021. Adjusted EBITDA for the 12 months through May increased 36% to approximately £94 million, while first-half adjusted EBITDA is expected to reach at least £40 million. Growth across Lookfantastic, Myprotein and newer retail categories has allowed THG PLC to reiterate its full-year revenue, profitability and cash-flow guidance despite unusually high whey costs. THG shares nevertheless closed 1.9% lower at 30.28 pence on June 24, suggesting investors want evidence that operational improvement can produce sustained debt reduction rather than another temporary recovery in adjusted earnings.

Why did THG shares fall even after revenue growth and adjusted EBITDA accelerated?

The immediate market reaction reflects the difference between improving performance and exceeding expectations. THG PLC confirmed that trading remained in line with its existing full-year guidance, but the update did not materially raise the company’s revenue, adjusted EBITDA or cash-flow outlook.

Investors had already seen evidence of stronger trading in the first-quarter update and the company’s June announcement that its €445 million term loan was trading above par. The June 24 statement reinforced the turnaround narrative rather than introducing a completely new earnings upgrade.

The shares opened as high as 32.90 pence before closing at 30.28 pence, indicating that early optimism faded as investors examined the remaining risks. Stronger revenue and adjusted EBITDA are positive, but the market continues to focus on the quality of cash conversion, the pace of debt reduction and whether margin gains can withstand commodity inflation.

THG PLC also faces a difficult comparison between operational momentum and its depressed valuation history. The stock remains far below the levels reached after its 2020 initial public offering, leaving some investors reluctant to reward another promising trading update before the improvement appears in audited cash-flow and balance-sheet figures.

The decline therefore does not necessarily imply that the trading statement was weak. It suggests the market is applying a higher burden of proof to THG PLC after several years of restructuring, disposals, strategic changes and volatile profitability.

How significant is THG’s return to first-half growth after several years of disruption?

First-half revenue growth of approximately 6.5% marks a clear improvement from the 2.5% contraction recorded in the first half of 2025. Excluding the deliberate restructuring of THG Nutrition’s Asian operations, growth reached approximately 7.6%.

This acceleration matters because THG PLC has spent several years simplifying its business after a period of rapid expansion. The January 2025 separation of THG Ingenuity left the listed company focused primarily on THG Beauty and THG Nutrition, creating a clearer consumer-brands model but also removing a technology narrative that had previously supported expectations of higher valuation multiples.

The current growth is emerging from the two businesses that now define the listed group. THG Beauty is benefiting from stronger skincare sales, new brand launches and social-commerce activity, while THG Nutrition is expanding through direct online channels, physical retail, licensed products and adjacent categories.

Revenue growth alone is not sufficient because THG PLC operates in competitive consumer markets where promotional activity, fulfilment expenses and input costs can absorb additional sales. The more encouraging signal is that trailing adjusted EBITDA increased from £68.9 million to approximately £94 million despite intense whey inflation.

The next test is whether growth remains durable during the second half, when comparisons may become more demanding. THG PLC must show that the recovery reflects increased customer engagement and category expansion rather than temporary pricing, promotional timing or favourable channel mix.

Can Lookfantastic turn social-commerce growth into durable THG Beauty profitability?

THG Beauty’s performance was supported by a 9.2% year-to-date increase in skincare revenue and continued growth at Lookfantastic. The platform added brands including Dyson, BEAME and Dr. Loretta while expanding its active customer base.

Lookfantastic also reported approximately 48% year-on-year revenue growth through TikTok Shop during the second quarter. This positions the business to benefit from the shift towards beauty discovery through creators, short-form video and social platforms rather than traditional search-led e-commerce alone.

Social commerce can improve customer acquisition by placing products directly inside entertainment and recommendation environments. Beauty is particularly suited to the format because demonstrations, routines, comparisons and influencer endorsements can shorten the path between discovery and purchase.

The commercial risk is that rapid social-commerce growth may come with high promotional, affiliate and marketing costs. TikTok Shop can produce substantial order volumes, but THG PLC must ensure those customers generate satisfactory contribution margins and return for purchases through channels that the company controls more directly.

Lookfantastic’s broader value depends on its ability to become a discovery platform for more than 1,000 third-party brands while using customer data to support advertising, retail media and personalised recommendations. Recent expansion into retail media could create higher-margin revenue from brands seeking access to Cult Beauty and Lookfantastic audiences.

THG Beauty must also manage the tension between third-party brands and owned products. External brands attract customers and increase choice, while owned brands can generate higher margins. Pushing owned products too aggressively could weaken relationships with the premium brands that make the platform useful to consumers.

Is Myprotein becoming a broader consumer brand rather than an online supplement retailer?

THG Nutrition reported continued growth across online and offline channels, with revenue excluding Asia increasing approximately 11% during the first half. Myprotein’s year-to-date unit volumes increased by about 60%, indicating that the brand is reaching substantially more consumers even as commodity costs remain difficult.

The growth strategy is increasingly moving beyond large bags of protein powder sold directly through websites. Myprotein is expanding across ready-to-drink beverages, bars, snacks, activewear and licensed products distributed through supermarkets, convenience stores and other retail partners.

Licensed product sell-in is expected to exceed 60 million units during 2026, compared with 43 million units in 2025. Planned launches in energy drinks, protein water and breakfast products during the second half will broaden Myprotein’s exposure to everyday consumer occasions.

This shift may improve the quality of the business model. Licensed and retail distribution can increase brand awareness, reduce dependence on paid online customer acquisition and generate income without requiring THG PLC to manufacture and distribute every product itself.

The company reported that approximately 18% of direct-to-consumer customers purchased activewear during May. Cross-selling apparel alongside supplements can increase average order values and deepen customer engagement, although fashion inventory introduces sizing, returns and markdown risks that are less prominent in nutrition products.

The larger strategic opportunity is to position Myprotein as a global health, wellness and performance brand rather than a specialist sports supplement seller. That could support a higher long-term valuation, but only if category expansion strengthens margins instead of creating an unfocused collection of licensing agreements and product experiments.

How serious is record whey inflation for THG Nutrition’s margin recovery?

Whey is a core raw material for many protein powders and represents one of THG Nutrition’s most important input costs. The company described current whey commodity inflation as unprecedented, creating pressure on gross margins across its core powder range.

THG PLC is responding through strategic price increases, category diversification, product reformulation and a greater contribution from margin-accretive formats. Retail partnerships and licensing can also reduce direct exposure to some manufacturing and distribution costs.

Pricing power will be central. Consumers may tolerate higher prices when the Myprotein brand remains competitive with specialist rivals and mainstream alternatives, but excessive increases could reduce volumes or encourage customers to switch towards cheaper products.

The 60% increase in unit volumes suggests demand has remained strong so far. However, investors should distinguish between units and revenue because smaller ready-to-drink products, snacks or licensed goods may carry very different selling prices and profit contributions from large protein-powder orders.

Commodity inflation can also create a timing mismatch. Raw material costs may rise before price changes take full effect, while lower-cost inventory purchased earlier can temporarily protect reported margins. The true impact may therefore become clearer as the year progresses.

The company’s ability to maintain gross margins while expanding adjusted EBITDA is encouraging. Sustained margin recovery will require either easing whey prices, continued consumer acceptance of higher prices or enough growth in more profitable categories to dilute the impact of expensive protein inputs.

Does stronger free cash flow show that THG’s turnaround has moved beyond adjusted earnings?

THG PLC expects first-half free cash flow to be its strongest since 2021, an important milestone for a company frequently judged more harshly on cash generation than adjusted EBITDA.

Adjusted EBITDA can improve through cost reductions, accounting classifications and business disposals without producing an equivalent increase in cash available for debt repayment. Free cash flow provides a more demanding test because it reflects working capital, capital expenditure, interest and other real cash requirements.

The company has guided to full-year free cash flow of between £25 million and £50 million. Delivery towards the upper end would strengthen confidence in management’s forecast that net debt can decline to between £110 million and £130 million by the end of 2026.

THG PLC ended 2025 with net debt of approximately £233 million after receiving cash from the sale of Claremont Ingredients and reducing gross borrowings. The company also retained approximately £333 million of combined cash and available facilities, giving it liquidity to operate through short-term volatility.

The strongest first-half cash generation since 2021 suggests cost control, inventory discipline and working-capital management are improving. Investors will still need to see whether cash generation remains positive across the full year rather than relying on the timing of supplier payments, inventory purchases or seasonal receipts.

A credible cash-flow turnaround would change the investment case more substantially than another period of revenue growth. Lower net debt would reduce interest exposure, improve strategic flexibility and make the equity value less sensitive to concerns about refinancing.

What does THG’s term loan trading above par reveal about lender confidence?

THG PLC’s €445 million term loan traded above par during the first half for the first time since its issuance in March 2025. The loan price had increased by approximately five percentage points from the beginning of 2026, reducing its implied yield.

Debt-market performance provides a useful counterpoint to the equity reaction. Lenders appear increasingly confident that THG PLC can service its obligations, maintain liquidity and reduce leverage, even though shareholders remain cautious about how much value will ultimately accrue to the equity.

The company’s principal debt facilities extend to December 2029, reducing immediate refinancing pressure. This gives management time to convert operational improvement into lower borrowing and a stronger capital structure.

A term loan trading above par does not mean financial risk has disappeared. THG PLC still carries meaningful debt relative to its market capitalisation, and interest payments reduce the cash available for investment or shareholder returns.

Credit investors generally prioritise downside protection and repayment capacity, while equity investors require growth after financing costs and dilution. The positive loan performance therefore demonstrates improved solvency confidence without automatically establishing that the shares are undervalued.

The divergence between debt and equity sentiment is one of the more interesting aspects of the update. Lenders appear to believe the turnaround is reducing financial risk. Shareholders are waiting to see whether the same turnaround creates meaningful earnings and cash-flow upside after the lenders have been paid.

Could THG’s £78 million VAT claim materially accelerate balance-sheet repair?

THG PLC has submitted retrospective value-added tax claims totalling approximately £78 million relating to the treatment of certain protein powders and nutritional supplements. The claims followed a favourable tribunal ruling involving Sun Warrior and HM Revenue and Customs.

The potential recovery is large relative to THG PLC’s current market capitalisation and its forecast year-end net debt. Receipt of the full amount could materially strengthen liquidity and accelerate deleveraging.

The company has not recognised the claim as certain cash and continues to await a substantive response. This is the appropriate treatment because tax disputes can involve additional reviews, technical distinctions and extended administrative processes even after a related legal decision.

Investors should therefore view the claim as potential upside rather than part of the base-case valuation. Building the turnaround thesis around an uncertain tax receipt would weaken attention on the operating improvements management can control.

A positive settlement could reduce net debt, fund investment or create capacity for shareholder returns. A rejection or prolonged delay would leave the core 2026 plan broadly unchanged but remove an increasingly visible source of speculative value.

The VAT claim also highlights the asymmetry in THG PLC’s current valuation. At approximately £497 million of market capitalisation, a £78 million receipt would be meaningful. However, investors are applying a discount because both the timing and recoverability remain uncertain.

What does the THG share price reveal about institutional and retail investor sentiment?

THG shares closed at 30.28 pence on June 24, down 1.9% during the session. The stock was approximately 4.8% below its June 17 close of 31.82 pence and about 6.7% below the May 22 close of 32.44 pence.

The shares are trading within a 52-week range of approximately 25.50 pence to 52.55 pence. The current price is only around 19% above the annual low and roughly 42% below the high, despite improved first-half trading.

THG PLC’s market capitalisation is approximately £497 million, which remains modest compared with annual revenue exceeding £1.7 billion. Revenue comparisons alone can be misleading for low-margin retail businesses, but the valuation illustrates the scale of investor scepticism.

Company-compiled consensus forecasts approximately £1.80 billion of 2026 revenue and £101.7 million of adjusted EBITDA, implying a margin of around 5.6%. At the current equity value, the market is assigning limited value to the possibility of sustained growth after accounting for debt, interest and execution risk.

The share-price response suggests investors want an earnings upgrade, faster deleveraging or resolution of the VAT claim before applying a higher valuation. Reiterating guidance is constructive for business credibility but insufficient to force a rerating when the market already expected recovery.

In our view, the update strengthens the operational case while leaving the valuation debate unresolved. The shares appear inexpensive if THG PLC delivers more than £100 million of adjusted EBITDA, generates £25 million to £50 million of free cash flow and reduces net debt towards £120 million. They may remain inexpensive for an excellent reason if input inflation, competition or working-capital demands prevent that cash-flow conversion.

Which second-half milestones will determine whether THG’s recovery becomes sustainable?

The first milestone will be confirmation that first-half adjusted EBITDA reached at least £40 million and that the stronger free cash flow was not driven primarily by temporary working-capital timing.

The second will be THG Nutrition’s ability to absorb whey inflation. Investors should watch gross margins, average selling prices, customer retention and the contribution from licensing, ready-to-drink products and snacks.

THG Beauty must demonstrate that Lookfantastic’s growth is profitable after marketing and promotional expenditure. Continued skincare momentum, customer growth and retail-media monetisation would strengthen the division’s strategic value.

Net debt will remain the most important financial measure. Progress towards the £110 million to £130 million year-end target would reduce balance-sheet concerns and increase the credibility of future capital returns.

The company must also provide clarity on the Asian licensing transition. Excluding Asia improves the reported growth rate, but investors need evidence that the new model creates structurally higher margins and cash generation rather than simply reducing reported revenue.

A response from HM Revenue and Customs on the £78 million VAT claim could become a major catalyst, although the company cannot control the timing. Until a decision arrives, the claim should remain outside normal operating forecasts.

The turnaround is becoming more tangible, but THG PLC is still in the stage where one strong half does not settle the argument. The second half must prove that Beauty growth, Myprotein expansion and cost discipline can generate cash after commodity inflation, interest and investment requirements.

Key takeaways on THG’s H1 growth, cash-flow recovery and investor outlook

• THG PLC expects first-half revenue growth of approximately 6.5%, compared with a 2.5% decline in the corresponding period of 2025.
• Revenue growth excluding the deliberate restructuring of THG Nutrition Asia reached approximately 7.6%.
• Trailing adjusted EBITDA increased 36% to about £94 million, while first-half adjusted EBITDA is expected to reach at least £40 million.
• Lookfantastic is benefiting from 9.2% skincare growth and approximately 48% second-quarter revenue growth through TikTok Shop.
• Myprotein unit volumes increased around 60%, while licensed product sell-in is expected to exceed 60 million units during 2026.
• Record whey inflation remains the most important near-term threat to THG Nutrition’s margin recovery.
• THG PLC expects its strongest first-half free cash flow since 2021 and continues to target £25 million to £50 million for the full year.
• Net debt must decline from approximately £233 million towards the £110 million to £130 million target for the equity rerating case to strengthen.
• The unresolved £78 million VAT claim offers material upside but should not be treated as certain cash.
• THG shares closed at 30.28 pence, down approximately 4.8% over five trading sessions and 6.7% from the May 22 close.