THG published half-year results on Thursday that beat its own guidance on both revenue and profit, and the shares went down. Not sideways. Down about eight percent on the day, and roughly fourteen across the two sessions that followed, to the bottom of a fifty-two week range.
The numbers themselves were good. Group revenue rose 7.2 percent on a constant-currency basis to £828.7 million, ahead of the 6.5 percent the company had guided. Adjusted EBITDA more than doubled on a like-for-like basis to £42.8 million against a £40 million target. The operating loss narrowed to £10.6 million from £30 million. For a business four years into a grinding turnaround, that is progress you can point at.
None of it was what the market was reading.
What the market was reading was one line about the third quarter, where management guided to around two percent revenue growth. From 7.2 percent to two percent. The company gave three reasons: a new European Union duty on beauty products in force since 1 July, a European heatwave that flattened demand, and revenue phasing into the fourth quarter and next year. Fourth quarter growth is still expected to recover to six or seven percent, and full-year revenue, EBITDA and free cash flow were all reiterated as in line.
The duty is the substantive part. In July the EU removed its €150 de minimis customs exemption and replaced it with a flat charge per item. For a business whose model involves shipping large volumes of individually small parcels across borders, that is not a rounding adjustment. It is a structural change to the unit economics of every package, applied at the exact point where the margin is thinnest.
Chief executive Matthew Moulding acknowledged the whole picture on the call: momentum going into the second half, alongside pressure on discretionary spending, record whey commodity prices, and the tariffs. All true at once.
Here is the cafe version, and it is the most familiar scene in the business.
You have had your best morning of the year. Two hundred covers, the new blend landed, staff were sharp, the numbers are on the till roll and they are undeniable. Then at two o’clock you mention to your business partner that the milk supplier is putting through a surcharge from next month and the road outside is being dug up for six weeks. Watch what happens to their face. The morning you just had stops existing. They are already standing in October.
That is not irrationality. That is what a share price is. A share price is not a receipt for work completed, it is a claim on work not yet done, and the only reason anyone cares about the half just reported is as evidence about the halves that have not happened yet. THG delivered proof that the restructuring is converting. It also delivered evidence that a policy change in Brussels can take five points off growth in a single quarter, and the market weighted the second piece of evidence more heavily than the first.
Which tells you something worth carrying. When your results and your guidance disagree, the guidance wins. Always. You cannot out-report a forecast, and a company that beats and then flags a slowdown has effectively published two documents, one about the past and one about the future, and the audience only reads one of them.
The doubling of EBITDA is real and it stays on the record. The turnaround is further along than it was in March. And the next investor conversation will be about the third quarter, because it was always going to be.
Nobody at that counter was drinking what was in front of them.
Source: AskTraders, “THG Shares Slide 8% Despite Beating H1 Guidance”
