Annual Report & Accounts 2019
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Annual report & accounts 2019 For the year ended 31 December 2019 01 The Hut Group Limited. Company Number 06539496 01 ANNUAL REPORT 2019 Contents Strategic Report...............................................................................................04 Directors’ Report..............................................................................................88 Independent Auditor’s Report.........................................................................92 Consolidated Statement of Comprehensive Income...................................94 Consolidated Statement of Financial Position..............................................95 Consolidated Statement of Changes in Equity.............................................96 Consolidated Statement of Cash Flows.........................................................97 Notes to the Consolidated Financial Statements.........................................98 Company Only Financial Statements...........................................................128 Company Balance Sheet................................................................................129 Company Statement of Changes in Equity.................................................130 Notes to the Company Financial Statements ............................................131 02 03 ANNUAL REPORT 2019 ANNUAL REPORT 2019 Strategic Report BEAUTY TECHNOLOGY WELLBEING Company Overview: THG BRANDS Introducing THG ™ Founded in 2004, The Hut Group consumer e-commerce solution for brands across skincare, haircare (THG) is a digital-first, global, consumer brand owners, in addition and cosmetics with the world’s consumer brand and technology to standalone digital services largest online 3rd party speciality group, with its pre-eminent Beauty (e.g. hosting, studio content, retailing platform across brands ™ & Wellness brands powered by translation, brand creation and including Lookfantastic, Skinstore & Ingenuity, the Group’s unique and new product development). Glossybox. Similarly, THG’s Wellness proprietary end-to-end e-commerce brand, Myprotein, including its technology and operating THG is the digital strategic family brands Myvegan, Myvitamins ecosystem. In addition to powering within the prestige Beauty & MP Clothing, are the largest and its own brands, Ingenuity provides industry globally, combining its fastest growth online Wellness a unique end-to-end direct-to- prestige portfolio of 7 owned brands globally. Sales Group Sales by Region 2019 £1,140m 34% United Kingdom 2018 £916m 26% Europe 24% Asia Pacific 2017 £736m 16% North America RESELLERS EBITDA Group Sales by Brand 2019 £111m 2018 £91m 50% Own Beauty and Wellbeing 31% Non-THG Beauty Brands 2017 £69m 19% Technology and Other Business segments THG’s unique fully vertically integrated business model Banking Facility Group Sales by Division covers the entire customer journey, from Beauty & 2019 £883m Wellbeing manufacturing in THG facilities to delivery 2018 £795m 46% Beauty to the end consumer. 36% Wellbeing 2017 04 £515m 05 17% Technology and Other ANNUAL REPORT 2019 THG’s growth is powered by Ingenuity, our proprietary D2C platform CUSTOMER LAYER ™ Ingenuity SERVICE LAYER For 15 years THG has been investing in the development of Ingenuity, its wholly in-house developed, proprietary, end- to-end e-commerce technology and operating ecosystem. Logistics Localised customer Marketing tools Payment options Inventory/ Courier Marketing Data network service merchendising platform platform Centres This ecosystem spans the and beauty technologists across entire customer journey, from our British Resource Consortium development and manufacture of (BRC) AA Grade accredited DATA LAYER wellbeing and beauty products at laboratories and manufacturing bespoke in-house manufacturing facilities, located in the UK, EU facilities, through to delivery to a and US. These facilities design global customer base from THG’s and manufacture for both our warehouse network. No other brand own brands and pre-eminent rd owner or retailer has built a fully 3 party brands; Deep consumer SKU-level analytics Data science Customer feedback Real-time data One business vertically integrated technology and insights data view • End-to-end digital brand building operating platform to retail globally and content creation delivered both at scale and profitably. by THG Studios, our UK & EU Ingenuity is a unique asset, and is based network of 6 studios, PRODUCTION AND DEVELOPMENT LAYER central to THG’s pre-eminence as a with a 7th studio in-build in digital brand builder and retailer of Manchester, which, at more than both its own and 3rd party brands. 270,000 sq. ft., represents the Ingenuity’s vertically integrated UK’s largest specialist digital services include: studio. In addition to powering R&D Product Manufacturing Own warehouse our own brands, THG Studios development • Retailing THG’s own brands, plus also provides brand creation and prestige 3rd party beauty brands digital content services for a wide and those of THG Ingenuity portfolio of beauty and wellness clients across 200+ THG built brands including Estée Lauder, and operated websites, all of L’Oréal, No.7, Procter & Gamble, During 2019, Language Connect • Fully in-house digital marketing our trading, marketing, influencer which are powered by Ingenuity, Johnson & Johnson and Nestlé translated over 25 million words services, powered by THG’s and content creation functions with fully integrated trading, plus a diverse range of consumer for THG’s own brands, as well as proprietary eCRM, Marketing and by providing deeply immersive merchandising, marketing product and content brands, such providing specialist translation for Influencer platforms, with fully experiential environments for modules, real-time business as Diageo, Disney, Kingfisher and UK financial, legal and professional integrated data sources through THG’s own brands and its 3rd intelligence data feeds, Walmart; advisory institutions, the National THG’s Data & Analytics Platform party clients payments, couriers, fulfilment Health Service, pre-eminent enabling instant marketing • The provision of highly technical • Hosting of THG’s own brands and customer service, ensuring wellness and beauty groups (Nestlé, optimisations across territories and specialised translation across 29 owned / controlled data a frictionless and personalised J&J, Deciem, L’Oréal) and a number and brands services to THG’s own brands centres in the UK, EU, US and retailing experience; rd of other sector leading groups and 3 parties through THG’s • THG’s Experience division Asia Pacific, in addition to hosting (Kantar, Ipsos, Hilton, ExxonMobil • New product development Language Connect division, consists of two luxury boutique 10,000+ 3rd parties including and Thomson Reuters); through the combination of data- ensuring technical content is hotels and a luxury country club pre-eminent technology brands 06 driven range building and our accurately and efficiently localised & spa in the UK, which support 07 highly experienced teams of food ANNUAL REPORT 2019 29 Data Centres 610M+ Annual visits to our websites • Delivery to a global consumer As a fully vertically integrated base through THG’s 9 distribution technology and operating platform centres (3 million sq. ft.), located built to retail brands globally direct in the UK, EU, US and Asia Pacific, to consumer, THG Ingenuity is a 6M New customers in 2019 integrated with our proprietary unique and disruptive proposition in warehouse management the e-commerce solutions market. software, and supporting a In the first 3 months of 2020, same day, next day or 2-day Ingenuity has secured a pipeline delivery service across every of over £200 million of contracted 155 Integrated courier territory globally SaaS revenues. services • I n-house Fraud Detection and Ingenuity’s typical SaaS contracts Prevention, powered by THG’s are multi-year and range in value proprietary Fraud Platform up to more than £100 million per contract and clients include: Nestlé, 7,000+ Employees • Global Customer Service Johnson & Johnson, Procter & coverage, with integrated Gamble, Walgreens Boots Alliance, translation services, and operated Groupe L’Occitane, Nintendo, through THG’s proprietary Mercedes, Honda and Daily Mail. Customer Service platform Given the need for digitalisation across all Retail sectors, we continue 195 shipping Ingenuity has powered THG’s own destinations to see strong demand for our brands for 15 years, whilst at the services across all categories and same time delivering single service anticipate further upside throughout provision to 3rd parties (such as the remainder of 2020 and beyond. Studio Content). However, over the last 18 months the Ingenuity 60 Supported languages division has expanded its model to include the aggregation of all its services, thereby providing an end-to-end e-commerce solution globally for 3rd party brand owners 1000+ Brands retailed on long-term Software as a Service (“SaaS”) contracts. 23M Worldwide customer database 198 Localised websites 08 50+ Local & global 09 payment methods ANNUAL REPORT 2019 2019 – Ingenuity Commercialisation __ Rapid scaling of THG SaaS Commerce division (P&G, Nestlé, J&J and others) The Evolution 2018 – Investment in Beauty Innovation and Manufacturing __ of THG Acquisition of Acheson & Acheson, a leading Beauty product developer and manufacturer THG is a vertically integrated global 1400 technology, e-commerce group and brand owner. We do this for ourselves and others with unparalleled success. 2017