THG Returns to Profit in FY 2025 as Turnaround Gains Momentum, Awaits Key VAT Ruling

THG FY 2025 results: profit on the board, momentum rebuilt, and a VAT wildcard

THG has posted a statutory profit after tax of £54.1m for FY 2025, swinging from a £326.1m loss last year. The turnaround is built on a much cleaner group after the Ingenuity demerger, a profitable disposal of Claremont Ingredients, and a strong second half in both Beauty and Nutrition. Guidance for FY 2026 is unchanged, with free cash flow expected to turn positive.

There is also a potentially material catalyst on the horizon: progress in the HMRC case on the VAT treatment of protein powders. If successful, THG expects a cash repayment of about £78m.

Key numbers at a glance

Metric	FY 2025	FY 2024 (restated)	Notes
Adjusted revenue	£1,717.0m	£1,751.4m	+2.3% on a continuing constant currency basis
Adjusted EBITDA	£76.6m (4.5%)	£83.3m (4.8%)	Ahead of guidance and company consensus
Operating profit/(loss)	£8.1m	£(147.9)m	Helped by lower adjusting items and Claremont disposal gain
Profit after tax	£54.1m	£(326.1)m	Includes £60.5m gain on Claremont and £117.8m profit on Ingenuity demerger
Net debt before lease liabilities	£233.0m	£304.3m	Debt facilities extended to 2029
Cash and available facilities	c.£333m	n/a	£183.1m cash + undrawn £150m RCF
Free cash flow	£(51.8)m	£0.4m	Stock build after strong Cyber period; expected to unwind in 2026
Q4 revenue growth (CCY)	+7.2%	n/a	Record H2 performance; H2 CCY +6.8%

Beauty accelerates: Lookfantastic drives best Q4 since 2021

THG Beauty showed genuine improvement through the year. Reported revenue was £1,107.9m (-5.4%), but on a continuing constant currency basis the division grew +0.2% after exiting non-core, loss-making areas and cycling FX and one-offs. H2 growth was +5.4% versus -5.9% in H1.

• Lookfantastic UK delivered +16.2% growth during the key Cyber period.
• THG says Lookfantastic is the #1 multi-brand beauty retailer on TikTok Shop, with sales via that channel up 112% year-on-year in November’s peak.
• Over 80 new brand launches and an own-brand refresh (including Ameliorate) supported the offer.

Margins held up close to guidance despite extra marketing: gross margin 39.3% (40.0% FY 2024) and Adjusted EBITDA margin 5.9% (6.1% FY 2024). Distribution efficiency improved too, aided by UK automation.

Nutrition grows every quarter, but whey and yen squeeze margins

THG Nutrition delivered reported revenue of £609.1m (+5.0%), or +6.4% on a continuing CCY basis, with growth in all four quarters. The strategy now leans into omnichannel and licensing alongside direct-to-consumer.

• Retail footprint expanded to over 40,000 doors worldwide.
• Licensing momentum: over 43 million units sold in 2025; expected to exceed 60 million in 2026, with partners including Mars and Greencore.
• Diversification beyond whey into creatine, hydration and activewear (c.12% of D2C sales), with a multi-year pathway to £100m in activewear revenue.

The headwinds were real: gross margin slipped to 43.2% (44.6% FY 2024) amid record whey prices and a weak Japanese yen. Adjusted EBITDA margin fell to 4.7% (5.9%). Asia is pivoting from D2C to partner-led distribution in H1 2026 to restore economics.

Balance sheet and cash: refinancing done, path to lower net debt

THG refinanced in April 2025, pushing maturities to 2029 and cutting borrowings to £430.4m (2024: £604.6m). Net debt before leases improved to £233.0m, and liquidity sits at around £333m. Central costs fell to £18.0m.

Free cash flow was a £51.8m outflow, mainly a temporary stock build after a very strong Beauty Cyber period. Management expects this to unwind in 2026. Distribution cost ratio improved by 80bps to 12.3% thanks to mix and higher average order values.

VAT case: why the ‘Sunwarrior’ ruling matters

A First Tier Tribunal decision found that Sunwarrior protein powders qualify for 0% UK VAT. THG has historically paid VAT on powdered protein, collagen and some supplements, and has submitted retrospective claims to HMRC. The company expects a substantive update by the end of Spring 2026.

• Potential cash repayment: c.£78m – about £60m on protein powders and a further c.£18m on certain supplements.
• Nothing is booked yet – this remains a contingent asset until HMRC confirms.

My view: this is a clear, near-term upside if the policy treatment aligns with the Tribunal’s direction, but investors should treat it as a bonus rather than base case until HMRC responds.

Outlook for FY 2026: guidance intact, cash generation targeted

Management left FY 2026 expectations unchanged and in line with company consensus. Free cash flow is anticipated in the £25m-£50m range, and net debt is targeted to reduce to about £110m-£130m before any strategic disposals, helped by free cash flow and potential VAT repayments.

• Beauty enters 2026 with underlying growth ahead of H2 2025 and a better US trajectory.
• Nutrition expects mid-to-high single digit revenue growth from retail and licensing, plus multi-category NPD.
• Assumptions include no material escalation in geopolitical disruption. Revenue exposure to affected Middle East regions was less than 1.5% in FY 2025.

The good, the bad, and what to watch

What looks positive

• Return to statutory profit, with operating profit of £8.1m and a much lower level of adjusting items.
• Clear H2 re-acceleration – Q4 CCY +7.2% – suggesting the strategy shift is biting.
• Deleveraging and long-dated facilities provide breathing room to execute.
• Beauty showing real share gains in the UK; social commerce execution appears strong.
• Nutrition omnichannel and licensing opening new distribution and higher-margin revenue streams.
• VAT claim offers a meaningful potential cash injection.

Where I’m cautious

• Adjusted EBITDA is still modest and declined year-on-year, with group margin at 4.5%.
• Free cash flow was negative in 2025 – delivery of the 2026 target is key to credibility.
• Nutrition margins remain pressured by commodity costs and FX; the Asia model transition needs clean execution.
• US revenue was down year-on-year on a statutory basis; momentum improved late in the year but needs to stick.
• The profit print leans on disposals and discontinued operations – underlying profitability still has work to do.

Jargon buster

• Continuing CCY growth – growth at constant currency, excluding disposed or exited operations, so you see like-for-like momentum without FX noise.
• Adjusted EBITDA – earnings before interest, tax, depreciation and amortisation, plus THG’s adjustments for one-off items and share-based payments. It is a proxy for operating cash profit.
• bps – basis points. 100bps equals 1 percentage point.

My take

THG has put a marker down: the group is simpler, H2 growth returned, and the balance sheet is in better shape. The Beauty engine is purring again, while Nutrition’s offline and licensing strategy is broadening the profit pool beyond whey. The task now is to turn that H2 momentum into sustained free cash flow and lift margins from today’s low base.

If HMRC sides with the Sunwarrior direction, the VAT repayment could accelerate deleveraging and give THG more strategic optionality. Until then, watch three things in H1 2026: cash generation as Beauty stock unwinds, evidence of ongoing US improvement, and steady progress on Nutrition’s Asia pivot. Deliver on those, and the turnaround story gets harder to ignore.