Does THG (LON:THG) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, THG Plc (LON:THG) does carry debt. But should shareholders be worried about its use of debt?

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When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does THG Carry?

You can click the graphic below for the historical numbers, but it shows that THG had UK£457.9m of debt in June 2025, down from UK£686.2m, one year before. However, it also had UK£129.4m in cash, and so its net debt is UK£328.5m.

How Strong Is THG's Balance Sheet?

The latest balance sheet data shows that THG had liabilities of UK£556.3m due within a year, and liabilities of UK£643.9m falling due after that. On the other hand, it had cash of UK£129.4m and UK£121.3m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by UK£949.5m.

When you consider that this deficiency exceeds the company's UK£638.3m market capitalization, you might well be inclined to review the balance sheet intently. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine THG's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Check out our latest analysis for THG

In the last year THG had a loss before interest and tax, and actually shrunk its revenue by 4.1%, to UK£1.7b. That's not what we would hope to see.

Caveat Emptor

Importantly, THG had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost UK£32m at the EBIT level. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. For example, we would not want to see a repeat of last year's loss of UK£184m. And until that time we think this is a risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 2 warning signs for THG that you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.