Welcome to THG's Q3 2024, and Demerger Update. There'll be a brief introduction statement given by Matthew Moulding, Founder and CEO, followed by a Q&A session. If you'd like to ask a question, please press star one on your telephone keypad. I'd now like to hand the call over to Matthew. Please go ahead. Good morning, everybody, and thank you for taking the time to dial in this morning. Quite a lot going on in our announcements this morning, so prepared for a lengthy Q&A session if that's what's necessary. So, few of the points to update in there. We've obviously announced our updated plans regarding the Ingenuity demerger, which has been successfully supported by an equity raise as well, which was done overnight and confirmed this morning. Around GBP 50 million of that GBP 95 million equity raise was from existing long-term and institutional supporters, and within that, myself added GBP 10 million of that equity raise. A t the same time, we've done a strategic investment with Frasers. Nice way, you know, that relationship just keeps flourishing, and a small step there between us, as we continue to work closely together. I think, in terms of some of the things to note with the Ingenuity deal, what this raise means is obviously there's been some dilution in the shares this morning as those shares get issued, but that actual dilution unwinds as the deal completes. So the value of the cash that goes across to Ingenuity would lead to an equal and opposite removal of that dilution from THG PLC shareholders. And then with the additional value that on top is being paid, will be paid for Ingenuity, there'll be further reduction in shares in issue in PLC. Then just as a reminder, GBP 282 million worth of property leases also move across with the Ingenuity deal at the same time. I think some other things to update on. We've got our Q3 trade update in there as well. You know, pleased with the Beauty and the Ingenuity performances in particular. I I think, you know, the strength that we're seeing in those businesses is really testimony to the work that we've done over the last couple of years in repositioning those businesses. The Myprotein business went through the peak stresses and strains of its rebranding in July, but we've seen fantastic momentum since then, and September was the second-best month of the year with only January being better so far. We feel there's good momentum there as well. I think obviously there'll be plenty of Q&A, so maybe pause at that moment and then switch to Q&A, if that's okay, please. Thank you very much, sir. Ladies and gentlemen, just as a quick reminder, if you wish to ask a question, please press star one on your telephone keypad. Our first question today will be coming from Wayne Brown, calling from Panmure Liberum. Please go ahead. Morning, gents. Thanks for the time for the call today. I've got four questions, if I can take them one at a time. I promise I won't be long. In the RemainCo, can you give us a view as to what you think the sustainable level of debt should be in that business and what you're comfortable with, please? And then I'll go on to the others after, if you don't mind. Sure. Look, I think one of the things to remind there is obviously all the facilities remain within RemainCo, and so, there's no change in that regard. You know, the existing facilities are obviously more than adequate for RemainCo. Let me just remind you as well, Wayne, about that business with the RemainCo. If you were to look at 2023 performances, we delivered GBP 1.9 billion of revenues in RemainCo, which was about GBP 105 million with the EBITDA. That EBITDA then fed through to GBP 77 million in free cash flow, which was after interest payments and lease payments and everything. So obviously, the things that aren't included in there is if you make a capital, a debt repayment or any M&A, but GBP 77 million with free cash flow. That is obviously quite a significant cash generation. You know, and then if you add back your interest that you're on there, obviously, it's a much higher, pre-interest, cash flow figure. The sustainability levels could be much higher if we so chose to do within RemainCo, but that's not been the, you know, thought process here. Our thought process is around making sure RemainCo has got full optionality for what direction of travel it will take post-demerger in December this year. With that kind of strong cash flow generation, clearly the existing facilities are very much, you know, adequate and supportable, for what we want to do. You know, the board will decide as we go through next year as to whether it's the case that we use the free cash flow that we generate from RemainCo to either further pay down debt or whether we use it for other corporate purposes, such as share buybacks or dividends or even M&A. So the sustainability, obviously, of the cash flows and the balance sheet for RemainCo is very strong. Yeah. No, I don't think I'm doubting that the free cash flow now obviously gets freed up, et cetera. I was just trying to get a view as to if the board's given thought now as a RemainCo vehicle as to what that capital allocation framework would look like, and what you think the right level of debt that should sit within this business on an ongoing basis. And it sounds like that needs further thought, is what I'm hearing, but you're clearly comfortable at the moment. Yeah, look, it's low down the list in reality because, you know, that's more of the fun part of the job to sort of get to. So you, we, you know, they're the kind of discussions we'll be having when the time's right is to, you know, start to properly map out what's our strategy around what levels of leverage do we want to run to, what debt, et cetera. But that's something- Yeah for post demerger and for the future. I mean, well, it's probably worth, Steve here, just reiterating that we have committed to over a period of time to our debt investors to reduce gross gearing, gross leverage, which we've done previously by committing to reduce the RCF from GBP 170 million to GBP 150 million, which we announced when we did the extension. We've also reduced the gross leverage by GBP 282 million with the lease liabilities that transfer on the demerger. And then so obviously, as you look at that free cash flow, within three years, net debt becomes, you know, net cash. So ultimately, you're getting back to that position where perhaps more traditionally and unexpectedly as a PLC, you're in that, you know, 0 to 1x leverage type of trajectory. Yeah. So that's very much on the- Yeah. No option outcome for that. Sure. Next question is maybe a little bit more of a geek one, just so that I'm thinking about this correct, and IFRS, I think, does unfortunately come into play here. When I'm thinking about all the leases that are sitting within Ingenuity, there's obviously a cash component to the fact that Ingenuity will be paying rent on those sites, and that's obviously an IFRS charge that currently exists. That then obviously gets charged back to RemainCo in the future, and probably currently still does under the current contract, which is a question, I suppose, inherent in my statement as a service charge. But that GBP 77 million of free cash flow, does that take into account that kind of service charge kickback? Because there's obviously a disconnect between the P&L on an EBITDA line and the cash flow in the cash flow statement. So I'm just trying to get a sense of, in a long-winded way, I'm trying to get my head around the lease costs of fifty million-ish are obviously off balance sheet now in Ingenuity. Fine, but the recharge back in the contracts, is that all reflected in the free cash flow, not necessarily in the group EBITDA? Yes, it is. Fine. Okay, so there's no other changes to those contractual terms now that it's a separate vehicle. Everything is just status quo? Exactly. Fine. Okay. On the rebrand then of Nutrition, can you just opine on us? Because it feels as if just blaming it on the rebrand feels a little bit of a blunt instrument, to be honest, and I think lots of people I speak to probably question this in their minds as to, is that really the case, or is there something fundamentally else going on here in the industry or your position within the industry? I mean, I understand that obviously fighting for new customers on Google is exorbitantly expensive, and that's a structural issue with Google opening keyword searches to the whole world now. So that's obviously a challenge. But if it is then just the rebrand and not necessarily anything else that's going on, can you just comment on... This must be one of, you know, a really disappointing rebrand in the scheme of rebrands, and if you're looking at all, all consumer brands, are you looking at maybe revamping the team that runs Nutrition? And can you just talk about the quality of the people running the business in light of what's been a very, very disappointing outperformance? Yeah. So you won't be surprised that, you know, I totally disagree with the summary there. I think just to come back to the management teams and actually, maybe before I do that, let's just go back to Beauty. I think if this time last year, I probably had the same question on Beauty, which is, you know, it's disappointing. Is the industry changing? Have you lost your position? Is it Sephora? Is it Amazon? Is it any other competitor or dynamics, et cetera? And here we are now, you know, at the time, very much we made clear that we're making business model changes. We do these things for the long term. But let's be clear, there's always a, there's always any pain to do that. Now, you know, if you're a PLC-listed business, everybody likes straight lines, but straight lines don't exist for long periods of time. And, you know, to get the overall, we have to have a long-term trajectory upwards, we've got to do these pivots in business models from time to time. Now, if you fast forward to where we are today, 12 months on, from the calls to say that Beauty was, you know, totally disappointing and the rest of it, you know, it's now delivering record margin structures and probably the only Beauty business in its space that's delivering the growth that it's doing. So we've seen that payback from doing that. So, similarly, we did the same with Ingenuity. We overhauled that business model, put it through extensive change, and a lot of people were quite rightly questioning, "Well, you know, it's not a proper business model," and here we are now delivering record performances in Ingenuity at the same time, and couldn't be happier with where that's positioned. So then when we look at Nutrition, it's also worth remembering that Nutrition carried on growing through COVID and thereafterwards. So we put the other two business models through those changes, but we carried on growing, where most other businesses, if you look at all of what people might suggest are online peers or whatever, they've all seen 15%-20% reduction in that top line as the high street has reopened. We carried on growing and held on to that within our Nutrition division ahead of doing the rebrand. Now, the reality around doing a rebrand, this is a truly monumental level of effort that's required to do a rebrand of the scale of Myprotein, and that's because of the complexity that sits within the business. It's operating in every country of the world, with DCs all over the world, where you've got localized languages on the products. You've also got localized flavors, where the flavor in one country has to be different to another country... so when you come to do a rebrand, you are very much faced with quite a complex overhaul of doing that. Now, what we've chosen to do, I think I mentioned it in the September update, is in doing that, typically what people would do is they would job out a lot of stock to do that, to help speed through any form of rebrand. If you do that, though, that means in a lot of the bargain stores or outlets, you will see Myprotein products sold as a heavy discount on the old branding. If we were to allow that to happen, that means that our offline strategy, which is a huge market, everyone's seen the grocer and the offline retail growth that they've seen post-COVID, that means that that market is closed to us, because why would they want to support a brand that is discounting its product in the outlet stores? So as a result, we've stayed firm, we've grown our offline strategy, and I think the Myprotein team have done a fantastic job of growing the offline strategy throughout the world. We've only jobbed out GBP 1 million of GBP 100 million worth of Myprotein stock in the last 12 months, and if you were to go back the year before, it was GBP 400,000. So we have kept all of that stock within the Myprotein business on our websites and not let it go into the offline channel to disrupt that growth strategy we have in doing that. When you put that product online, and you need to sell through that GBP 100 million worth of stock and go through the old brand and transition to the new brand, with all that complexity that comes through the world, it is going to take a period of time to do that. When we launched this rebrand, we launched it into tailwinds. You wouldn't ordinarily launch a rebrand of this complexity if you had volatility in your whey pricing, or you had currency challenges, or things like that. So when I look at the Myprotein management team, and as I've proved before, I'm more than adept at changing management teams across the team. We've only been listed for over four years, and we've had quite a few changes that we've done, including firing myself as Chairman. You know, the... I'm more than happy to go in and change some of the management team, but when I look at the Myprotein management team, who I speak with and work with daily and hourly, what I can tell you is these factors are largely outside of their control. I want them to rebrand, to go and follow this strategy. To do that, they've got to transition, which means discounting the product online on our websites to do that. If you do that, you bring the average selling price down, which proves to be a challenge. You've got to move through that stock. So that- Yeah. That's something that naturally comes. What they can't control is whey pricing globally. We're not big enough to do that, and we can't control the Japanese currency either. We're not big enough to do that either. So there are factors that whoever I get to do that job, they've got to deal with those challenges and follow that strategy. So for me, the answer is, was the decision to rebrand the wrong decision? Should we have stayed with the previous branding, and that would have done us for the next ten years? And if that was the wrong strategy, that certainly sits with me and not the Myprotein team. So, Matt, my question was not about is rebranding right or wrong, or obviously, evolution takes place. It is more about the management of that. But yeah, answer, sir. Thank you. I think I probably asked my four questions already. I might come back for a couple more, but I don't wanna hold the call for too long. Thanks. Thank you much for your question, sir. We'll now move to Monique Pollard of Citigroup. Please go ahead, your line is open. Hello, morning, everyone. Can you hear me okay? Yes, a little bit tricky, but I think we should be fine. Okay, okay. I'll try and talk loudly. Sorry, there's a bit of background noise. So the first question I had was, you know, when we think about the profile of your cash flow going forward, you know, you've got the material reduction in the lease liability, you've got the highest sustainable free cash flow going forward. So when you have conversations with the rating agencies, you know, what do you think will change, and how will that affect your ability to refinance at more attractive terms, that EUR 600 million term loan coming due at the end of 2026? Look, look, just so you've got continuity of voices, I'll answer that, and obviously the team will jump in here as needed. I mean, look, in terms of doing the refinancing the balance sheet, you could do that, you know, before doing this transaction. Clearly, by doing this transaction, you've then got a very strong proposition by which, as interest rates are falling as well, we should be able to get the keenest deal. Now, it's worth also noting that that's a good couple of more than two and a bit years away yet. But that said, those conversations with the rating agencies already began as we started the planning around Ingenuity demerger. We've got a very clear steer from them of how they see it. To give you a recap on that, two out of the three rating agencies include your leases as being part of your gross leverage. So the fact that a large majority of the leases are moving out of PLC is obviously a huge positive for them. The second thing to note is, the rating agencies typically also remove your, your spend on tech from the calculation of your earnings as well, which, given we've got about GBP 60 million worth of tech spend as we build that asset out, that's a second massive positive for the credit rating agencies. So it, you know, we shouldn't be surprised that post this transaction, that they would be received very positively from the credit rating agencies, because you've got a very different business whatsoever that looks at, through which then will naturally-... Over the course of next year, go and refinance our balance sheet for, you know, for the years to come. Excellent. The second question I had was on Beauty. So the 3Q trading was slightly better than the 2Q, but kind of similar levels. I'm just wondering if that is a reasonable run rate to think of the peak trading or whether things like, you know, the success of the beauty advent calendars, et cetera, make you think that the peak trading could be stronger than the trading that we've seen in the 2Q and the 3Q? Yeah, look, I think in reality I think anyone in online retail would say to you that the summer wasn't the easiest time trading online. It just wasn't. September has picked up more broadly for everybody. I would hope that's pretty much a trend. So Beauty is in a really, you know, really good position. You know, we've had some great momentum in Beauty, which is reflected in the numbers this year. So you can always get bumps and things, and Q4 is a key trading period. But what I would say is the Beauty momentum coming into Q4 is really good. And we feel really positive. All of that said, you know, there's a lot rides on November. So if I was to sit there and say, you know, if I was a betting person today, I would think you'll see good momentum in Myprotein, but Beauty will be, you know, should be the standout performance. As we then get into next year, given that I'm expecting whey pricing to fall considerably next year, and I've got good logic behind that, I'd be expecting that Myprotein starts to come back to its own and be the star performer. But for the remainder of this year, like yourself, I do expect that Beauty is going to be stepping it up, but, you know, no pressure on the Beauty team. Excellent and I just had one final question, which was just on this lease liability. So the lease liability going forward for the RemainCo, the PLC, does that just, do we just take the current lease liability and do a straight reduction of the GBP 282 million? Or is there a bit of duplication, which means the reduction in the lease liability to the PLC isn't quite as much as the GBP 282 million? 30, Matt's whispering to me, so I might as well let him answer. Just coming off. It's not quite that straightforward, but it's not far off. You just add about GBP 30 million on top, which is subleases between Ingenuity and Nutrition, actually, for Nutrition production facilities that sit within some of the fulfillment centers, so the very extensive arm's length agreements are such that you have subleases for that part of the space, so you'd be looking at about GBP 60 million sat on the balance sheet of RemainCo. If you took away what goes to Ingenuity, add another GBP 30 million, and you can see the extent of deleverage that's going on in RemainCo. Excellent. Thank you very much. That was all my questions. Thank you very much for your questions. We'll now move to John Stevenson of Peel Hunt. Please go ahead. Great, thank you. Morning. Again, I've got a couple of questions. Actually, I might as well start with the lease question, as that was the last one on the mic. Can you just confirm what the cash rent's gonna be for RemainCo going forward? And then second question, can you comment on the annualized size of your offline Nutrition business now? Obviously, we've seen a raft of launches, both in terms of licenses and wholesale agreements. It's scaling extremely well. It'd be good to get an idea of what the sort of annualized run rate might be. And also, any feedback you're getting from retail partners in the U.K. and overseas, there seems to be some pretty strong POS and differentiated products going into the U.K. supermarkets. Just interested in terms of how that's actually going through at a sell-through level in store? Sure. So cash lease cost, guys? Yeah, cash lease cost, John, will be more like 20 in RemainCo. While the lease liability is higher in Ingenuity, the P&L charge is more balanced, and that's just because you've got slightly longer leases in Ingenuity. Okay, brilliant. Thank you, Matt. And then answering the question in terms of the offline piece for Nutrition. Look, for this year, I'd expect. I don't know. I don't think we disclose this, but listen, it's about a little bit more than GBP 40 million of net sales to our business. That's after you give funding support to retailers and the rest of it. So for this year, which is a big step up on the prior year, we're obviously expecting a big step up again next year. The run rate has been going in a really good direction, so it is core and fundamental. But the plan is that within a few years, we can get this to be, you know, hundreds of millions, and that's not just a, you know, a plucking a number out of the sky. You know, there's an account-by-account rollout that we, you know, that we target, that we underpin. Some of them come our way, and some of them get delayed, et cetera. In terms of the feedback we get from retailers, naturally, it's been very strong. Myprotein's got an avid following, so it brings a different type of footfall for retailers as well. We recently launched across the estate in WHSmith's, and we launched that with the old brand, and then that switches to the new brand at the end of this month, and then that will be supported by some pretty good activity going in there. We're in Boots. Good feedback in Boots. Just launched in Holland & Barrett in the U.K. as well, and plenty of other places. You know, most grocers now would have a snacks range from us, and the Müller partnership seems to have gone really well. Soft launched first of all in Morrisons. Now, it's in Morrisons, Sainsbury's. I think it's going into WHSmith, so some of that range as well, but it's going across retail. U.S., similarly, has been a really good extension for us. Got won some really good accounts out there that are all set to launch, you know, within the weeks ahead. And then, even in Asia, things like in Japan, there's a lot of licensing we're doing there in particular, where you know, people will manufacture in. They were trying to navigate some of the challenges, the volatility of the Japanese yen, where we won't recognize the revenue, but we'll get a good income stream by actually licensing the product into certain retailers, and launching ranges that way, and we've been doing quite a bit of that of late. The strength of the brand is outstanding, you know, so, you know, in terms of it, its current position and the feedback on the rebrand is super strong. But even then, you know, we'll still be tweaking with that rebrand, but that'll be something people won't really see behind the scenes. You know, it's not something that's disruptive to the business. I think anyone who understands, you know, the extent of what's required on a rebrand will appreciate when you're the guys that are buying it, making it, putting it onto the websites, and then selling it direct to consumers it all over the world. It's a pretty complex exercise. Okay, brilliant. That's helpful a nd actually, final question, one on, if I can, just in terms of how the physical split's gonna work within head office. I don't know the extent to which the group sort of benefits from essentially working together, and how that's gonna work post the merger. I know obviously there are board members, people like John, I guess, who are maybe more naturally inclined to be swinging towards Ingenuity. How might that split go in terms of personnel? It sounds like you've told him what I haven't already told him yet, which is, well, I'll have that conversation with him at some point. I mean, look, it, you know, there is some small, sort of like cross challenges that you have there, right? So in the building that we're sat in now, there's a floor here that's dedicated to Ingenuity, for those of you that have been here. The reality is, they're being relocated across into another building on the campus, which will be purely an Ingenuity building, and so that simplifies that. That's all been in the planning here. There'll be some. You know, what we've now moved on to is actually looking for cost savings and synergies from actually these moves. You know, where have we got duplication of costs and things that we've because of the large group. So we've moved on to that, but it will be very much segregated in that way. We've probably got what, eight weeks to make sure it's all finalized and done. You know, London office has got a bit of Ingenuity. Well, it's got quite a bit of Ingenuity in there and Cult Beauty and so, you know, there'll be a bit there that we'll need to sort of nail down, but it's all in play, but it's not a massive exercise, being brutally honest. Okay, brilliant. Thanks, Chris. Thank you. Ladies and gentlemen, once again, if you have any questions or follow-up questions, please press star one on your telephone keypad. We'll now move to Patrick Folan of Barclays. Please go ahead. Hi, good morning, and thanks for taking my questions. Just two for now, but maybe this is more on what some skeptics have been saying probably this morning, but what if Ingenuity goes through some financial difficulty post the demerger, what will power the Beauty and Nutrition e-commerce operations in that scenario, ensuring kind of no disruption to operations? And in the statement, I know you talked about the arm's-length contracts with Beauty and Nutrition, and you've also taken on new contracts like Holland & Barrett. Is there any discrepancies between those contracts and service provisions we should be thinking about moving forward? Sure. So look, in terms of Ingenuity, we obviously have put a lot of thought into it, purely, not least because we passionately care about the business, but also recognizing, you know, people looking for a bounce back risk, et cetera, into that entire short thesis and the hedge fund story. So look, if you were just to take the basics of Ingenuity, last year it generated GBP 9 million of EBITDA. I think consensus for this year is 24-25, and consensus for next year is about 35. So what you can see is yes, it has been cash consumptive as we have been building this business up, but that profile changes quite dramatically. The CapEx at the same time has been dramatically reduced in recent years. So profitability is going up considerably, which is underpinned by very long-term contracts relative to anything else and your CapEx is in a really strong place as well. T hen if you go back to the balance sheet, starting with the cash balances that we have, which is probably now gonna be about GBP 85 million worth of net cash that sits in it from day one. On top of that, then, the banking facilities that it will have in place, it's worth just reminding people the debtor book in there is probably world-class, but relative to anything else, when you think about who they are, they're all the big CPGs in the world, the Nestlé, the Coca-Cola, and the Mondelēz, as well as THG PLC will be one of them as well. So the financing available to that quality asset book is very strong, as well as a very strong starting cash position and a very much improving profile. But let's say for some reason, you know, the management team that are running that, as a reminder, there's a Chair, CEO, CFO. We're gonna appoint some non-execs to it as well. It'll have very strong governance that goes in there. But let's say that between them, they make a hash of it and somehow, you know, unimaginably, they get it all wrong, you know. Then, you know, that happens in business all day, all day, every day across the world. You know, there'll be no doubt a long string of people that would want to try and take over the running of that operation and that client book, not least, you know, THG PLC, in five years' time could come back and have it for the deal of the century or something. But the probability of that happening is something that we've obviously worked very hard on to ensure that's as close to zero as possible. Okay. Got it. And, as you mentioned last month, Ingenuity needs about GBP 150 million to kind of fund the next couple of years. How should we maybe think about bridging the gap from what you raised today. I mean, you indicated, you know, debt facilities will play its part, as discussed in the release, but maybe expand on the gap from where we are right now to that GBP 150 million. Yeah, sure. So that gap is on, so you've got GBP 85 million, so you've got a GBP 65 million gap. If you look at the debtor book on that, you've got GBP 50 million-GBP 60 million worth of debtor book on there, of which you can get, you know, term sheets, of just the-- this is just looking at the debtor assets that sit within that business. The term sheets against that would be circa 60%. So you're already at sort of a GBP 130 million worth of funding on day one when you have that business. As you then your debtor book grows, then obviously just on that line of finance alone, that grows with the business and the business is fully funded. That's aside from any other options that you would have on the table. So when we put that forecast together now, that was the numbers as well that were in consensus view. So, you know, as you put those numbers together from the consensus requirement of cash that it would need, you can see that that's funded from day one, just from debtor book on top of day one cash. So the other options that are available to it, and that's four years out as well. So when you get to that point. So from that perspective, the modeling we've done, et cetera, we feel that that's a very prudent position to take with the business and should be more than ample to do that. To such an extent as well, that insiders have backstopped this deal. So if investors chose not to take shares in Ingenuity and instead prefer to have more exposure to PLC and no doubt, you know, basically a dilution kickback from PLC, then insiders that have, you know, myself and other long-term shareholders have said, "Well, we'll go further into Ingenuity." So, you know, I think that gives you the view of how well put together we think that model is. Great. Thank you. And just one clarifying question on the sublease between Ingenuity and Nutrition, that was GBP 30 million on top of the GBP 60 million sitting within RemainCo, correct? Correct, yeah. Thank you. Thank you very much for your question, sir. We'll now take questions from Andrew Wade, calling from Jefferies. Please go ahead. Hi there. A couple from me. First one, just on the Ingenuity valuation. Sorry, I missed the very start of the call, so you may have already gone into detail on it, but if you could give us just a little bit more detail on how you arrived at that 100 million post-money equity valuation, that'd be very helpful, and I'll leave it at that one for the moment. I'll come back to the other one. Sure. So, Andrew, I think you would be one to appreciate this, but the wider market has certainly fed this back to us that our share price, while Ingenuity is still part of THG, is negatively impacted from that ownership of Ingenuity. So I think it is a widely accepted fact that today the value of Ingenuity is negative within THG PLC. That said, a lot of work's been done by people, you know, various analysts to try and put a value on it on the sum of the parts basis. So, you know, a number of people have put a valuation of GBP 200 million-GBP 300 million on it, I believe some of the analysts have done, which is an EV value. Obviously, then you've got to take the leases off, et cetera. So that was one way we looked at it. But the fundamental way we've looked at this is to say, what's a DCF say? And we've been working with the banks on this. We've obviously had an awful lot of advice. Right. And the advice that we had back was very clear, which is there is an equity value of GBP 0- GBP 100 million, but within that makeup, that was assuming there was GBP 75 million of cash going in, and so essentially GBP 25 million of true equity value. What you've then got to add on top of that is the GBP 282 million worth of leases. So you end up with a valuation of about GBP 382 million on an EV basis, which compares to, you know, the, it's very much at the top end of any of the valuations that have been put out there on some of the parts by anybody. So when the banks were doing that work, you could've, we could've come up with a negative valuation, but that just doesn't equate in our heads to be correct, right? That... And we saw the- the deal for that, that was done with Net-a-Porter and the GBP 500 million of cash dowry that went with that business, you know, but that's just, you know, we don't subscribe to that. So that's how we came up with it, which is DCF valuation. You could've, you know, depending on what you use in those calculations with DCF, as you know, you can make it look very ugly. We've done a really sensible valuation, or the banks have done. I say we, they have done to the Board, and we came to 0- 100. So we picked the 100 as being, because we had enough support around the room to backstop that deal. S o if people thought that was too rich, then no one's gonna go into it and then we'll have to stand on the backstop. But that's how we got there, and it's an EV of, what? GBP 382 million, which might now be GBP 392 million, actually, because of the extra GBP 10- Yeah. Yeah. Thanks for it. Thanks, helpful color. Can we just go back to the lease recharge point? Because I think there's some confusion. Some people think that Ingenuity are gonna be recharging back all of the leases that it takes with a cost markup back to the Nutrition and Beauty businesses. Whereas the other way of looking at it is that you're just gonna be recharging the small bit of the Ingenuity portfolio, which is actually used for manufacturing, sort of the sublet bit of it. Could you clear that up for us, please? ... It's exactly that, the latter point, which is, you know, Ingenuity takes its own leases and runs its own business off the back of it, like any business, as it's a private company. There's obviously a sublease of things where it's 100% Myprotein's got a 1 million sq ft manufacturing and distribution facility, so that's just passed through. No markup, that's just passed through. But then, you know, with all of the other leases that Ingenuity would have, that's just the normal course of its running its business, and it and that's reflected in the normal commercial terms that have been agreed with Myprotein, with Beauty, and also then with all of the major brands, the Nestlés and et cetera. So that's just in their normal commercial deal, whether that's in a platform fee, a fulfillment fee, or whatever it would be. Yeah. Yeah. Perfect, that's really clear. So the rent that Ingenuity takes on, well, the only bit that will be recharged on is the bit where it is actually being used by Beauty manufacturing or whatever it is, as a sublease? Yes, where it's solely being used. Exactly. Yeah, perfect. So- Okay, and then just... Sorry, and then just a final one. You're obviously doing the bit of dilution in terms of share count from, or a bit of increase in the share count from the rights issue, the fundraising. But then obviously, you've got the sort of demerger mechanism. Could you sort of talk us through what's gonna happen overall in terms of the share count in the RemainCo? Yeah, sure. Look, it. So we've issued shares to raise the cash. As that cash then goes into Ingenuity, when it gets demerged at the end of the year, then those, it will be paid for in cancellation of shares. So what will happen is, the share count reduces by the same amount we've just raised by and more. So the dilution impact, there is no dilution impact from this deal. If anything, you know, it, it's in fact there'll be even less shares in issue. Yeah ... from this deal. So it, there's no dilution to shareholders. The reality is, those people that elect to take shares in Ingenuity are essentially the ones that have taken the dilution in doing the transaction. So there'll be less shares in issue at the point of demerger than there were as of last time. Perfect. Really helpful. Thank you very much. Thank you for your question, Mr. Wade. Ladies and gentlemen, we have time for only one question, and that question will be coming from Anubhav Malhotra of Panmure Liberum. Please go ahead. Hi, team. I've got a few, if you don't mind. I'll start with the tax losses that have been collected in the business over the last few years. Will the RemainCo be able to keep any of those tax losses and save on tax outflows going forward, or will they all be sitting in Ingenuity? Because I guess that has been the one that has been losing, making a lot of PAT losses over the years. Maybe let's start with that one. Hi, Anubhav. I'll take that, if you want, Matt. So the comprehensive nature of the demerger has meant that we have had to make sure that at the point, sorry, of the separation of the businesses, so that completed first of March 2022. Back then, we had to do a full allocation of capital, sorry, of tax losses on the balance sheet. So obviously, we have a large deferred tax asset. That deferred tax asset is split down into the respective entities, so there is no ability to do that now because all that tax clearance had to happen back at the start of 2022. But it does mean there is a sensible allocation based on where the losses have arisen historically, and both subgroups will actually have a deferred tax asset. Obviously, RemainCo is sheltered for the first three, four years. Into the long term, given the strong free cash profile, and profits chargeable to corporation tax that will be generated in the entity, it will start generating some tax, on a cash basis into the future, but that won't happen for the first three years or so. All right, that's very helpful, thank you. Then I wanted to ask on the Beauty business, clearly, over the last two years, you have given up on a lot of unprofitable sales in overseas territories. Do you still think that the 6% margin target, EBITDA margin target, that you set for the business two years back, is that still the right level of medium-term target? But, or with the sale of those, with the closure of those unprofitable businesses, it should probably be a bit higher than that 6%. Look, I think in part it depends as well on making the most of some of the synergies we've been delivering. The reason we've got there so fast on the margin stack that we gave as a medium term is a lot down to the work that the Ingenuity robots and stuff have delivered. For those of you that have a look at the fulfillment line in THG, you will see that the RemainCo's fulfillment costs have dropped by about 20% in the last two or three years, which equates to about 400 basis points. Now, that on GBP 1.9 billion worth of sales is almost benefit. Now, some of that benefit stays within the likes of Beauty and has gone into the margin stack. As you can, you know, you can see that that's gone from a 2% margin business to a 6%. Now, that's not all down to that efficiency because we do put some of that into the proposition, et cetera. But you know, obviously, that has been a key factor in helping Beauty to be so efficient at doing what it's doing, and that's another reason why Ingenuity has been winning so many, you know, fulfillment contracts because the robots are so efficient in what we do. So in answering your question, it depends on how the model, you know, continues to edge forward, and it also depends on how much more savings we get to just keep bringing out of the robotics within the business. But you know, it certainly is something we're looking at as to whether in the longer term we get beyond that 6% in a more meaningful way. We didn't expect to be at this level so soon, and it really, the fulfillment side is a key driver of that. Thank you, and one more on the working capital profile for RemainCo. I mean, for the last couple of years, you have had working capital being a major source of cash inflow coming in because you have adjusted your inventory levels. Do you foresee that being remaining a source of major capital cash inflow going forward for the next one to three years, or it will be a more normalized negative working capital that you typically see in the business? Hi, Anubhav. We, if you go back a couple of years, clearly, because of the investment in inventory, as we built our infrastructure and warehouses and fulfilled, we've had that significant benefit the last couple of years, from stock unwinding, in particular. As we go forward, because RemainCo is, you know, largely cash generative, cash-based, and we get paid obviously before we pay our suppliers, there's actually negative cash flow. But I think that the main benefit in working capital has largely unwound, and going forward, it will be. We still anticipate a chunky amount, a reasonable amount in this year, but going forward, it will plateau. But RemainCo will still remain slightly positive from a working capital perspective. Very helpful. And just one last one, and this is one you may choose not to answer, but my question is around the Ingenuity EBITDA forecast for this year, which is around GBP 25 million, as you mentioned, as per consensus. Can you give us a rough idea on how much of that is made from services that are provided to the internal businesses, the Beauty and Nutrition businesses, and how much of that is made from services provided to external clients? We, we haven't given that split, you know, in, in the particular detail previously, but I think the key indicator, if you have a look at the GMV that goes through Ingenuity, then still, you know, presently, you know, 2/3 of that would be, you know, through Nutrition and Beauty, by and large. Now, that's quickly becoming fifty-fifty, and you'll, and you'll see that more next year in that earnings profile. So it's still, you know, the majority of that profitability will come through from the internal clients, but it's leveling out really quite quickly. So if I understand the question right, the reason I'm being honest, right, I flicked it to Steve to say, 'cause I didn't quite understand the question. Can I just check, is the question, what's the split of profitability between internal and external? Yeah. Right. Well- Yes, that, that's the question, and the reason for asking that is because the internal revenue that Ingenuity generates has been on the decline for the last couple of years. So just to understand if that's a major source of profit and that's been going down, and will that be able to be covered up from externals? Yeah, look, so I can give you the broad breakdown here. There's three factors that make up the earnings of Ingenuity. You have the internal profitability we'll make from dealing with our ourselves, and then it's got the external from the likes of all of the big CPGs out there. And then the third thing is it's got a central cost base on top within its business. Now, the rough math is, on a monthly basis, it's about GBP 1.5 million of profitability from internal, and then from an external basis, depending on the given month, it's about GBP 2.5 million worth of profitability from external. So you've got about GBP 50 million worth of a year of internal income, EBITDA, that comes from that. Take off from that your central costs that sit within the business, then you end up with that kind of number, that gets you back to where you are on consensus. Now, it can fluctuate because what will happen is, to Steve's point, as you get into Q4, we, as RemainCo, are very active in trading in Q4, so that profitability can spike at this time of year now for RemainCo, making more money for Ingenuity in the next few weeks ahead because the massive step in volumes. But on a normalized flat basis, that's broadly the kind of outlook we've got, which, you know, obviously the external side is the area that builds. Now, the reason that if you looked at the commercials on that, the, as Steve said, the GMV is like 2/3 at the moment to internal, and yet we make less profitability from internal. But you've got to reflect the fact in that commercial agreement that, you know, the scale of those clients of Beauty and Nutrition, because this has been through a really rigorous third-party testing. We also get visibility when we're pitching for big GMV clients. We know where those deals end up landing. So as a result, it's only fair that Beauty and Nutrition get, you know, competitive, strong deals, which means that they're not that profitable in, you know, for, you know, given the GMV size, but in cash terms, they're very profitable to the business. Whereas the smaller clients that make up the other areas of GMV, you know, there's a lot more hassle in versus a very, very big client, so there's a lot more cost and friction points that come in. So as a result, the commercials fairly reflect that. Excellent. Thank you so much. I appreciate the clarity you've given. Thank you. All right. Thank you for your question, sir. No, just sorry very much for that, sir. I'm just going to say that concludes the question and answer session, and we turn the call back over to Matthew. Thank you, sir. Okay. Well, thanks, everybody. Look, it's been a very interesting few months and it'll be an interesting eight weeks ahead, no doubt, to get to the point of demerger. But thank you for everybody's support, and look forward to speaking again.