Software and online retail giant THG has warned its profits for 2022 will be lower than previously expected, despite its sales rising to record levels.
The Manchester-headquartered group said it now forecasts its adjusted earnings before interest, taxation, depreciation and amortisation of between £70m and £80m for the last 12 months, down from the £100m-£130m forecast in its last update in October.
In a statement issued to the London Stock Exchange, THG added that higher raw material prices as well as the timing of large contacts in its Ingenuity division were also contributing factors.
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The group also revealed it's reviewing "lossmaking categories and territories within the THG OnDemand division", which includes websites such as Zavvi and Pop in a Box.
It said the move would increase its focus on its core beauty and nutrition ecommerce businesses as well as Ingenuity.
The review, as well as an internal reorganisation, has already seen the loss of 2,000 jobs during 2022, according to the FT, and will save £100m a year.
THG confirmed that a further £30m of savings are to be found this year.
The figures come after BusinessLive reported that a loan worth almost £70m to finance THG's new headquarters had been cancelled
Chief executive Matthew Moulding said: "In a year that presented numerous challenges across the world, I'm proud that the THG team has delivered another record revenue performance at £2.25bn.
"Amongst many highlights, I'm especially pleased with the progress of Ingenuity, successfully competing with major global technology giants to transform digital operations for global retailers and brands.
"With the completion of the divisional reorganisation, and around £100m of annual efficiency savings already delivered, the group enters 2023 with strong momentum to achieve substantial margin expansion.
"Core commodity prices used within our nutrition division have seen significant deflation since their record highs in 2022, giving us confidence in significant profit progression as we move through the year ahead, against a much reduced group cost base.
"We remain highly confident of delivering adjusted EBITDA margins in excess of 9.0% over the medium-term.
"Our delivery of c.£50m free cashflow in H2 2022, coupled with c.£640m of cash and facilities at year end, mean we are well positioned for further operational and strategic progress, notwithstanding the continued macroeconomic uncertainty."
The news follows a turbulent 2022 for THG which saw its shares start to recover from hitting historic lows.
Japanese technology investment giant SoftBank announced in October that it had sold its entire stake to THG co-founder Matthew Moulding and Qatar Investment Authority, the country's sovereign wealth fund.
The move saw SoftBank make a £450m loss after it bought an 8% holding in THG in May 2021.
A $1.6bn deal that would have seen SoftBank take a near 20% stake in a major division of THG was abandoned in July last year.
Belerion Capital and King Street Capital Management considered making a £2.07bn bid in May which was unanimously rejected by THG.
A venture capital firm controlled by property tycoon Nick Candy also considered a £1.4bn takeover.
However, a month later it was announced that both bids by Belerion Capital and King Street Capital Management and Nick Candy would not taken any further.
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