THG PLC (LON:THG) delivered third quarter results "comfortably below expectations", according to analysts at Liberum, who said they "struggle to see" how the fourth quarter will deliver enough growth to close the gap with full-year expectations, which were maintained.
Third-quarter revenue growth slowed to 2%, while estimates beforehand had been anticipating a 9% rise from THG.
The company's main revenue contributors of Beauty and Nutrition both grew less than forecast, while the services arms of Ingenuity (eCommerce) and OnDemand (personalisation) also disappointed, with Ingenuity slowing further as it repositions to try and win higher-value clients.
Liberum's analysts estimated that M&A contributed around 3%-4% to growth in the quarter, "implying organic growth pace worsened and turned negative" from near-flat in the first half of the year.
One upside was THG Nutrition, where growth improved sequentially to 2.8% growth from a 6% decline in the second quarter
THG boss Matthew Moulding persisted with his guidance group for adjusted EBITDA of between £100mln and £130mln, along with guidance for cash on hand at year-end of circa £500mln.
The Liberum analysts said they "struggle to see growth in 4Q recovering to low double digits which is needed to deliver guidance at the bottom end".
They cut their forecasts for THG to 7.4% growth for the full year and reduced EBITDA expectations to "just under" the £100mln-£130mln guidance.
The analysts said they expect £140mln-£150mln of net debt by the end of 2022 and with the group’s £500mln term B loan becoming payable only in December 2026, noted that "there are no major liquidity concerns especially if the group can achieve flat FCF next year".
"However," they concluded, "we struggle to see upside as there remain downside risks to 2022E guidance, delivery of Ingenuity Commerce promise is uncertain, outlook for next year is clouded, and the group is back in debt."