Nov 7, 2018 | Techcelerate Ventures |
Annual Report & Accounts For the year ended 31 December 2017 The Hut Group Limited.Company Number 06539496 Contents Highlights 2 Group International Sales 3 Strategic Report 4 Directors' Report 40 Independent Auditor's Report to the 44 members of The Hut Group Ltd Consolidated Statement of 46 Comprehensive Income Consolidated Statement of Financial Position 47 Consolidated Statement of Changes in Equity 48 Consolidated Statement of Cash Flows 49 Notes to the Financial Statements 50 Company Only Financial Statements 78 Company Balance Sheet 80 Company Statement of Changes in Equity 81 Notes to the Company Financial Statements 82 +47% 228M +38% 600M Revenue 2017 2016 2015 In Strategic Investments EBITDA Bank Facility From May 2018 Highlights Group International Sales 70% 63% 50% UK International 2 3 Annual Report and Accounts 2017 Strategic report Shareholders Name % Matthew Moulding & Controlled Management Equity1 26.7 Kohlberg Kravis Roberts & Co 15.0 Balderton Capital 14.3 Sofina Partners S.A. 9.0 Oliver Nobahar-Cookson (held via Offshore Trust) 7.7 BlackRock Funds 7.5 Old Mutual 7.4 Others 12.4 100.0 Fully diluted shareholding of any party with a 5% or greater shareholding in THG (as at 31 March 2018) 1 Matthew Moulding has the beneficial interest in 20% of the 26.7% shareholding, although he has full control of the whole 26.7% 5 4 Progress in 2017 2017 has been another year of explosive growth for THG, powered by our proprietary technology ecosystem, Ingenuity. Revenue has grown by 47% to 736m and EBITDA by 38% to 69m (9% of sales). We continue to deliver on our strategy of driving rapid internationalisation with 70% of our sales coming from outside the UK, a year-on-year increase of 7% and we further developed the THG Brands business with 58% of sales from our own brands. To accelerate the development of the THG model we carefully selected acquisitions in key vertical markets, investing 164m in strategic acquisitions this year. We enhanced Ingenuity 's end-to-end capability through acquiring Hangar Seven, a digital content studio, and UK2, a web hosting business, as well as continuing to build our portfolio of brands adding ESPA and Illamasqua. We further grew our international beauty retail footprint by acquiring RY.com.au and became Europe's largest beauty box provider when we added Glossybox to our growing beauty box and advent calendar proposition. We also continued to invest organically, spending 25m on developing Ingenuity functionality and internationalisation capability and 39m of capital on infrastructure projects including manufacturing, distribution, supply chain, and office accommodation whilst employing a further 1,884 people this year to take our total headcount to over 4,000 at year end. 2017 has also been a standout year for us operationally, we commissioned our 1m sq ft warehouse, manufacturing and fulfillment centre in Cheshire, a production facility in Kentucky and we acquired a beauty manufacturing plant with ESPA. We continue to invest in our operational capability with a warehouse and manufacturing facility in Wroclaw, Poland opening in 2018. International Sales Mix Sales from Own Brands Revenue 501 334 736 2015 2016 2017 42% 35% 49% Revenue m CAGR % (3 years) Gross Profit 318 211 126 2015 2016 2017 GP m CAGR % (3 years) 53% 41% 59% EBITDA 69 50 30 2015 2016 2017 Adjusted EBITDA m CAGR % (3 years) 49% 41% 52% Cash in Hand 187m 174m 142m 200m 150m 100m 50m 2015 2016 2017 Banking Facility 515m 345m 210m 600m 2015 2016 2017 2018 to date 300m 500m 600m 100m Operating Cashflow 51 88 42 2015 2016 2017 Operating Cashflow m +38% EBITDA 228m In Strategic Investments 183m Of Equity Raised +47% Revenue 2015 2016 2017 50% 63% 70% 2015 2016 2017 52% 52% 58% 6 7 Annual Report and Accounts 2017 THG ideas with momentum Our Business Model THG is an international technology company focussed on digital retail in the beauty and wellbeing sectors. Founded in 2004, by CEO Matthew Moulding, to develop an ecommerce technology platform, THG now operates 166 localised websites retailing to customers in 164 countries. THG is powered by Ingenuity, our proprietary global technology ecosystem. We wholly own and operate a globally integrated end-to-end technology stack that spans hosting, warehousing and fulfilment, data science and ecommerce technologies through to integrated payment solutions with customer service. This seamless integration makes Ingenuity a unique technology platform proven to power brand growth on a global scale; our own brands and retail sites, as well as providing platform services for some of the world's most innovative organisations. By owning the whole customer journey from manufacturing our products, selling them direct to consumers via our own websites, and dispatching from our warehouses, we can deliver high quality products and experiences to customers whilst maintaining an industry leading cost base. We will continue to invest in our business model to ensure we continue to be the leading global online beauty and wellbeing provider. Internationalisation Direct to Consumer Data Driven Retail 8 9 Annual Report and Accounts 2017 THG powered by Ingenuity Built over the last decade, Ingenuity is our proprietary technology ecosystem that is engineered for vertically integrated ecommerce. It powers all of our own brands and retailers and is key to our ability to internationalise as it supports multiple currencies and payment methods, and provides the tools for us to put data at the heart of our retail experience. Ingenuity drives personalised brand experiences and global transactions through our proprietary algorithms. Optimised search and responsive design help to drive transactions and post purchase engagement is driven through automated eCRM, product bundling, and reward and referral systems. Ingenuity simplifies the transaction journey through one-page checkout, integration to our fulfilment platform and fast page load across the globe. All of this is underpinned by our global footprint of 29 data centres, on demand infrastructure, and high performance network. Ingenuity provides the ultimate hosting performance for our brands, our retailers and our brand partners. Our ambition for Ingenuity is to be a global platform leader and alongside our own brands and retailers we already power some of the world's leading businesses including Nintendo, The Daily Mail Group, Honda and Hero Cycles. 42 Currencies Traded Worldwide 166 Localised Websites 29 Footprint of Global Data Centres 32 Local and Global Payment Methods 22m Worldwide Customer Database 500m Annual Visits to THG Operated Websites 10 Tbps Total Network Capacity 350k Route Optimisations Each month 70% International Sales Mix (in 2017) 193 Shipping Destinations 35 Languages Supported 10 GbE Premium Network 450 Dedicated Engineers >30 Courier Integrations Powered by 93% Growth in Brand Partner Revenue Transaction & Finance Management Warehousing & Fulfilment Hosting Content & Creative Services Data Science Translation & Language Services Customer Services Ecomm Tech Platform 11 Annual Report and Accounts 2017 10 Strategic platform investments Ingenuity facilitates digital first content and acquiring Hangar Seven in April 2017 has allowed us to scale and productise our content and creative services further across the Group. We now operate an end-to-end content production facility, from driving the strategy, to concepting and storyboarding, to video and photography production. Hangar Seven delivers global digital impact with localised content powered by data and insight. With an integrated in-house digital studio we are able to rapidly create content assets and videos, driving our online marketing activities across all sites and customer touch points. In May 2017, we completed our first technology acquisition, UK2, a web hosting business, which has allowed us to significantly develop our technology ecosystem. We now have 29 global data centres situated in strategic locations, with access to multiple high quality transit and peering providers. 100TB provides exceptionally high bandwidth allowing us to respond to customer needs, for example video hosting. UK2 is now a core part of our technology proposition, and its high performance infrastructure will facilitate our ability to increase capacity, speed and resilience for our global brands. 7 Studio Locations Across Europe and the US 10 GbE Premium Network 166 Producers, Photographers, Stylists, Designers and Creative Directors 29 Footprint of Global Data Centres 140k Sq ft of Photographic Studios 10 Tbps Total Network Capacity 12 13 Annual Report and Accounts 2017 Warehouse and fulfilment 2017 was a year of unprecedented operational reorganisation as we built out the foundations for our global fulfilment and manufacturing footprint. Our wholly owned 1m sq ft Cheshire based production and distribution facility was fully commissioned in late summer 2017. The facility is powered by our proprietary Warehouse Management Software, Voyager. During the year, our onsite engineering team made over 650 service and cost enhancing software changes. We expect investment in the software to continue as the site moves towards maturity in 2018. In 2017, the foundations were laid and building commenced on our Poland based European production and distribution facility, expected to open in Autumn 2018. The site will also be powered by Voyager. Ahead of the build of our European Centre, we opened a satellite facility in a nearby location in Poland to expedite the move into that region. To support our production and distribution facility in Kentucky, USA, we opened a satellite fulfilment centre in Reno, Nevada, to service the West Coast and to underpin our Beauty Subscription Box acquisition, we commissioned two European satellite facilities in Sweden and Poland. Post year end, we have finalised details of our new build Content Studio facility, located in the North West of England, with building to commence in 2018 of a 165k sq ft Content Studio. A number of our existing content studios will be consolidated into this state of the art facility. In addition to the above new projects, we exited a further 16 fulfilment facilities in the year, four legacy UK Food production and fulfilment facilities, and we inherited a further 12 facilities globally with M&A in the year which were exited and absorbed within our core infrastructure in the UK, Europe and North America. 14 15 Annual Report and Accounts 2017 THG Brands overview The global beauty and wellbeing markets are being transformed by digital channel shift and the explosion of high growth, small and medium sized independent brands. We are building a portfolio of these brands and are uniquely well-placed to become the global digital leader. We have expertise in scaling brands direct to consumer, our global retail sites provide a platform to fuel growth, we manufacture products in-house at our facilities around the globe, and Ingenuity delivers operational efficiencies while internationalising rapidly, therefore, we are able to tackle these structural changes at speed, something traditional brands cannot easily respond to. Retailing over 800 prestige brands in 164 countries provides us with unique data-driven insights into industry trends and international growth opportunities, helping to shape our long-term brand strategies. We have supplemented our brand portfolio with the acquisition of beauty subscription business, Glossybox, which has increased our ability to drive brand education and adoption, test innovation, whilst introducing new customers to our brands. We plan to make more acquisitions in this space and plug them into Ingenuity's technology ecosystem to: Improve efficiency and profitability; Drive direct to consumer sales through both own brand and reseller websites; Improve international sales mix; Drive education and adoption through targeted sampling and subscription services; Improve quality and deliver cost synergies through vertical integration and in-house manufacturing. 16 17 Annual Report and Accounts 2017 Strategic brand investments In September 2017, we acquired one of the world's leading spa and skincare brands, ESPA. The products are sold in over 700 luxury spas across 50 countries and prestige retail outlets including Liberty London and Harvey Nichols. The ESPA treatments delivered in spas all over the world has created strong brand awareness and affinity which makes it an attractive brand to grow direct to consumer, harnessing our retail websites and the power of Ingenuity. This acquisition complements the THG business model, as ESPA is vertically integrated, adding beauty manufacturing to our significant expertise in the sports nutrition market. We have already made significant progress by integrating ESPA with Ingenuity, delivering cost synergies and improving direct to consumer sales. In 2018, we plan to internationalise the ESPA offering further. 12% 34% Uplift in Profitability Post Acquisition Increase in Direct to Consumer Participation 18 19 Annual Report and Accounts 2017 Strategic brand investments In October 2017, we acquired colour cosmetics brand, Illamasqua, which is used by professional makeup artists around the world. It is a cult brand renowned for award-winning, professional-grade products with rich cultural heritage. Bringing Illamasqua into our own brand portfolio has allowed us to increase NPD (New Product Development) frequency, helping to move the brand into the contemporary segment. Through integration with Ingenuity we have delivered efficiencies and have begun to focus on strategic business-to-business partnerships, as well as driving online direct to consumer sales. 282% 43%
Your Chief Funding Officer for raising Seed and Series A
The Hut Group is one of the largest tech companies to be founded in the North West of England backed by Balderton Capital.
Tech Investment and Growth Advisory for Series A in the UK, operating in £150k to £5m investment market, working with #SaaS #FinTech #HealthTech #MarketPlaces and #PropTech companies.