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Good morning, everyone. We are very excited to be releasing our first update as a listed company today, and thank you for taking the time to join us for our Q3 update call. I am Matt Moulding, Executive Chairman and CEO of The Hut Group; and I'm joined this morning by John Gallemore, our Group CFO; Steve Whitehead, our Group Commercial Director; and Matt Rothwell, Deputy Group CFO. I'm going to take you through the key messages from our Q3 update, and then we will take any Q&A, which you can submit via the webcast.In terms of the Q3 highlights, we are really pleased with how the group has performed during the quarter, delivering strong sales growth across all our business units, which is leading us to upgrade our guidance for the full year today. We're especially pleased to be doing this in view of the fact we've delivered an IPO at the end of this quarter. Overall, group sales are up 39% in the quarter, ahead of the 36% growth seen in the first half of the year. The strong growth has been driven across all divisions. Online direct-to-consumer revenues, which were up 51%, and the commerce revenues from our Ingenuity platform were also up very strongly at 171%. We added a number of Ingenuity partnership deals and completed the acquisition of luxury skin care brand, Perricone MD, for $60 million in cash.As previously guided, margins were stable in the period as we continue to invest in the business to deliver great customer service and build our product and brand offering. The group has a strong balance sheet with net cash of GBP 420 million at the end of the period, so we are well positioned in terms of investing for growth. In terms of an Ingenuity update, Ingenuity is our proprietary technology platform, which has continued to make great progress in the period, delivering strong growth in commerce revenues and a robust pipeline of inquiries and potential future partnerships. We have also opened 3 new warehouses internationally on our Voyager software and added additional courier and service options to the platform to improve the service options, which will support for future growth. We have already integrated the Perricone MD acquisition, which was acquired in September, and this is now operating on our Ingenuity technology and operating platform.Moving on to the outlook for the business. Despite the ongoing uncertainty that exists, we are really pleased with the growth we have delivered year-to-date, and we're seeing that momentum continue into Q4. As a reminder, Q4 is an important trading period for us and typically represents around 30% to 32% of the group sales during any year, with Black Friday being an important trading period. As a result of the strong performance and our confidence in the outlook for the remainder of the year, we are increasing our sales growth guidance to 30% to 33% for the full year, up from 25% at the time of the IPO. I'd also like to give an update around governance and draw your attention to 3 appointments we have made to build out our audit, sustainability and risk committees. Governance is very important to us at THG as we transition to being a listed company, and we will be making further appointments in due course.So in summary, we have delivered a strong performance during the quarter and are well positioned to deliver a good result for the full year. We have a strong balance sheet with significant cash reserves, and we'll continue to focus on our strategic priorities, which will deliver long-term growth.Thank you all for listening and taking the time, and now we will take some of your questions.
Thanks, Matt. So just as a reminder, questions can be submitted via the webcast platform. So first question is what is driving the acceleration in sales growth in the third quarter versus the first half?
Two really key factors that are driving our growth right now. The first is the volume of new customers, which we are bringing to the group, and that was exceptionally strong in the quarter. Safe to say we added around 2.5 million new customers in the quarter. But then the second factor is the frequency with which all of our customers are shopping with us is also continuing to trend upwards. So they are the 2 key factors that are really driving that D2C revenue growth.
Okay. Next question. Can you talk us through the drivers behind the upgrade to FY '20 revenue growth guidance? And what's the reason for the implied slowdown in Q4?
Look, we've made significant investments across the group year in, year out. The constant factor behind our growth performance is our own technology and the investments we've made within Ingenuity continue to drive the business forward. At the same time, in, say, the Nutrition division, we made some significant changes to that business a couple of years ago, and that's really starting to pay dividends down. So you've seen us focus on high-growth areas such as vegan, vitamins. And then we've done a significant rebrand and -- which has allowed us to move into bars, foods and snacks. So there are various factors within each individual division, which are contributing factors. But essentially, it's our Ingenuity platform that is driving the success.In terms of what's driving an implied slowdown for Q4, no more than the fact as we've stated that a large proportion of our sales happen in Q4 each year. Typically around 30% to 32% of the group's sales happen in the final quarter of the year. And so that's a big ask on the business in terms of Black Friday and Cyber and on infrastructure. And so the sensible thing to do is just to take a cautious view of that right now. All that said, momentum coming into Q4 remains very strong, and we remain very optimistic about how we're going to handle that.
Our next question is from Andrew Ross at Barclays. Can you talk us through the comps from Q4 last year? Is there anything we need to be aware of by division that might impact the reported growth this year?
No. There's -- look, comps are every -- if you're doing a good job and you're growing your business at an accelerated rate, the comps are always more difficult each quarter. There is nothing in the next quarter that concerns us in any way, shape or form. The comps are very much usual for us, and so we don't see any challenges there.
Next question also from Andrew Ross at Barclays. Can you give an update on Ingenuity and how conversations are going with key customers?
Sure. I mean, look, we've obviously got elevated levels of interest across all aspects of our Ingenuity platform as we stand at the moment. We will be giving separate updates. We're pleased with the progress we're making. We are at advanced stages with a large number of potential contracts, and we do expect to be able to get the market in due course on that book. But we are very pleased with the progress so far.
Next question is from Adam Cochrane at Citi. Is there anything to call out geographically? And then can you talk about the impact of freight costs? Have you seen higher freight costs in the period?
Sure. Geographically, look, it's a very good spread across the whole world. We're seeing strong growth in most [ touches ] of the world. And we are a very international group with the vast majority of our revenues happening outside of the U.K. That said, the U.K. remains a really robust marketplace. And we are -- it's a mature market on many levels, and yet we are seeing incredibly strong growth within the U.K. But it is a pattern that we've seen reflected across many [ touches ] of the world. So you should see that feed through at the full year results.What was the last part of the question? Oh, the freight costs. So yes, look, in terms of distribution costs, obviously, as passenger planes increasingly come online, we'll see those continue to fall. Asia is a key focus for us because that's where those costs have been of the most exceptional nature. And we are seeing those continuing to fall and very much within guidance as to what we've put there. But obviously, as passenger planes continue to come online, we'll see further improvements.
Next question is from Nick Hartley at GIC. Can you provide any more color on the composition of the pipeline for Ingenuity? And have you added salespeople to the Ingenuity team?
John, do you want to...
Look, I'll pick that up -- that one up. But to do so, I'll just remind everybody of what Ingenuity, what the platform actually is. There are 3 elements to it at the moment. So we've got the enterprise platform, which is a platform that our businesses trade on in terms of nutrition and beauty. And just to remind that this is a global, fully scaled, out-of-the-box solution that we offer to our clients. We've also got a premium platform that is launched within the quarter. This is kind of a lighter version that gives the clients more flexibility. And then we've got our live version, which is [ 5 clicks ] to get a transactional website.Now I'll just talk you through some of the pieces that we're working on across all 3 to give you a sense of how the pipeline is building. But in terms of the enterprise, you would have read about Homebase and Hotel Chocolat. I'll give you a flavor of some of the other contracts that we've got at the moment. So we're in very advanced stages with the U.K. high-street fashion brand, which is part of PLC, where they've got a U.K. DTC. We're looking to roll out across another 5 international territories. Another contract that we're about to sign is with a high-end -- very high-end fragrance brand. We want to launch across 6 sites and 3 continents: Europe, Asia and the Middle East. They have currently got a U.K. and a U.S. platform. [indiscernible] is the obvious version to accelerate globalization.We're just about to sign a contract with the luxury apparel brand, which is part of the CHANEL house of brands, where we're rolling outside in Southeast Asia. They will sit alongside their existing U.S. and U.K. platform, which is on a different platform. We've got a global CPG household clinic product solution. Again, this has been tried by the clients on a different platform, which was a complex solution with many partners. They're lifting and shifting that onto our platform. And by doing that, unit economics will now work for them but also they'll be able to then roll that out globally. We've also just about to launch a very well-known Scottish whiskey brand, where we're going to be globalizing their D2C.In terms of the premium platform, the lighter version, I'll give you a sense of the flexibility of solution that we can deliver on that. 3 weeks ago, we launched a confectionary solution for a very well-known CPG brand whereby the customers will be able to effectively pick and mix online in terms of what they put into the solution. In addition to that, it will be personalized. They will be able to print a message in a card and print a message on the outside of the box. So what we're effectively combining here is really complex technologies but with an even more complex operational model, where we've got to kick off these different boxes, print them. You've got to QA from a food perspective and then deliver it. So we can provide all of that to the client.We've got a different solution on this platform to a global beauty house. They have a nail brand, and we're experimenting with a B2B solution, delivering the products to their clients, to their end users. In addition, there's a very well-known food and beverage global business, where we're offering a personalized solution for them also. So effectively, customer will be able to choose what message they put on the product, and we'll be delivering that for them also. And then additionally, on that platform, we've launched a games franchise, which is part of Microsoft, whereby in addition to offering the technology, we're also offering a physical print-on-demand capability along with distribution. So those are the kind of flexibility of solutions that we're now offering to these organizations. In terms of territory mix, we're launching solutions in the quarter in the U.S., Canada, U.K., all across Europe, China, Japan, South Korea, Taiwan, Thailand, Australia, New Zealand and the Middle East, which gives you a sense of how it's rolling out internationally. So in terms of building out with the business development function, Nick, so we're accelerating the recruitment there. So we've got people who are working on verticals, which is CPG, beauty, retail, food and beverages. We've got territory expertise. So we've now got people based in the Middle East, selling the solution into there as well as North America and Europe. And you can see from the territory spread that we're really well represented. And then also we're recruiting people today with specific products.So I've mentioned the 3 platforms there. What I haven't yet mentioned is the fact that we're taking all the solutions that sit within the enterprise platform and taken them headless. So we're in discussions, for example, now with our first warehouse management software clients. We're already in discussions with clients to sell out our [ courier label ] printing software. As we've mentioned previously, we're in revenue with our influencer platform. And as we roll out more and more of those components, including [ Checkout ], the [ third ] platform, then we're recruiting people to sell those solutions. So the pipeline, the geographical spread and the product expansion are coming on really well since we last spoke.
Thanks, John. So next question is from George Pilakoutas at Numis. Can you give some color around nutrition and beauty and how these divisions have or business units have performed by geography?
Sure. I mean, look, we, at this stage, are not going to break it down into that level of granular detail. What I would say is you've seen nutrition's growth rate accelerate. And that's -- a large element of that is down to the position that we've made in that brand over the last couple of years. As we touched on earlier, the focus around vegan, vitamins, fast foods and snacks and moving that brand to be a much more premium proposition has played the key factor there. We are seeing continued strong growth across Asia. But really more established territories continue to perform really, really well. So we're pleased with where we're going in nutrition. You may have seen beauty looks to have had a bit of a slowdown on half 1. The growth of the beauty division is incredibly robust quarter in, quarter out. There is some slight differences to the trading calendar for that business quarter-on-quarter but, obviously, would have seen some slightly more elevated COVID-type hygiene-related sales, which would have slightly helped through half 1 versus Q3. But again, quarter mix there. U.K. remains really strong for both beauty and nutrition, but generally across the piece, we're seeing good global growth.
And a follow-up question, how volatile has demand been on a monthly basis given the changing levels of lockdown?
Surprisingly, not so volatile. We look at it on a day-by-day basis, hour-by-hour basis, not even a month-by-month. And we've not seen a great deal of volatility in that regard. There's obviously channel shift happening. That channel shift seems to be more permanent. And we don't find ourselves in a particularly volatile environment.
[Operator Instructions] Maybe on to the next question. Can you give some examples of the areas in which you're investing in the business, particularly in context of your margin guidance?
Sure. In terms of investments across the piece, Ingenuity and our infrastructure remains a key priority. So we continue to invest there, building out that proprietary technology and through distribution centers across the world and so on. However, then within each of the individual divisions, we are making investments. You saw us make the Perricone MD acquisition, which we're very pleased with, and that's now fully integrated and operating on our technology.You will see us do more of bringing those brands on board and taking them down to consumers for the beauty division. And then in the nutrition space, you'll see us do more vertical integration now, and that's all around speed of product and development of products for the market and being able to pick up the pace there and drive substantial growth for the long term. So the investments that we're making is all around our platform, our infrastructure and then, at the same time, adding more brands to our business as well.
Great. And then can we talk about plans for capital allocation and uses of the cash on the balance sheet?
Sure. It kind of follows on from the last question in many ways. It's really going to be in those 3 key areas where you may see us make some acquisitions across technology where we want to further strengthen and bolster areas where we've built our own technology. And that may well sit around things like security, in particular, and that's a particular focus for us. You will see us make some moves around sustainability, very focused around that. You may have seen, in the announcement today, around the 3 special advisers. One of those is specific around sustainability. We intend to invest some of that cash, however, in our balance sheet around further improving credentials, sustainability. Major brand owners have got 2 key problems for their businesses right now. One is reaching out to consumers on a direct-to-consumer basis and doing that across the world and second is addressing sustainability. And we want to be front and center for brand owners above ourselves and for other brand owners in being able to deliver the solutions there. And then more materially, we would hope that in this final quarter or in the first quarter of next year, you'll see us make further investments, especially across the beauty side as we see a really substantial global opportunity there. And you'll see us deploy some of the capital in that space, too.
Thanks. And then final question. Can you comment on organic versus acquisitive growth in the period?
Sure. It's 100% organic. So all our growth was organic. The last time we made a piece of M&A was Christophe Robin. I think that was around April, May time in 2019. So Q3 is 100% organic. Perricone MD will be adding small, small tiny amounts of sales and a bit of profitability in the near term, but that's all about a medium- to longer-term play.
Great. So there are no further questions, but the team are available all day today and all contact details have been made available on the [ RNS ], if you wish to submit further questions. And I'll just hand back to Matt quickly for any closing remarks.
Look, I think we've covered quite a bit in the trading update that we've done there. I think the only kind of comment I'd like to leave people with is that we completed our IPO at pretty much the end of this quarter. And so what makes it especially pleasing for ourselves is to be able to see an acceleration in growth in what has been a very, very busy quarter for us. We also managed to deliver a piece of M&A during that quarter. And so for ourselves, we are now coming into what will hopefully be a very busy Q4 as well.We feel that things have gone pretty well for us. We also have a very strong balance sheet, and we now look to deploy the capital on that balance sheet. And then if we can deliver on some of these major contract wins that we have in the pipeline across Ingenuity, that should put us in great stead for a very strong 2021, and that's now becoming our primary focus.
Thanks very much.
Thanks, everybody.