Exclusive: Ghd Group set to cut through £150m barrier

Ghd Group Holdings has seen underlying profitability move nearer to the brink of 20m over the previous two years after buying foreign distributors and building a closer relationship with hair salons and stylists.

The firm, based at Bridgewater Place in Leeds, recorded 19.7m in earnings before interest, tax, depreciation and amortisation (Ebitda) last year, up from 19.4m in 2008, despite an increase in its cost base as it sought to expand. It has pursued a fast growth strategy since it changed hands in a 160m management buyout, backed by private equity, in 2007.

Its upmarket styling irons are now sold in 15 countries and have been used by actresses and singers including Renee Zellweger, Jennifer Aniston and, reportedly, Madonna.

The company expects earnings to rise again this year, despite the slump in consumer spending, and its gross margin has continued to increase, reaching 66.4 per cent for the year to date. It is understood to have had a strong final quarter, with volumes sold growing by more than 15 per cent, compared to the same period last year.

No-one from Ghd, which stands for good hair day, was available for interview but a spokesman said: "Ghd is a great Yorkshire success story. We have invested heavily in the business.

"Despite the recession, the company has continued to prosper with sales significantly up on last year and we are well placed for the year ahead. We also continue to donate significant amounts to charity."

Martin Penny, one of the leading figures behind the growth of Ghd but who left his post as managing director for unexplained reasons in 2008, remains a shareholder.

The firm's European business, which sells in Spain, Italy, France, Germany and Scandinavian countries, grew strongly this year with volumes sold up 27 per cent so far on the previous year. Britain remains Ghd's major market, with volumes understood to be up by about seven per cent on 2009 for the year-to-date and up 17 per cent for the final quarter of this year.

Its products have proved popular among hairstylists due to their curved barrels and ceramic plates, which means women change their look faster than other straighteners while retaining colour and preventing damage.

The firm has been helped since the buyout by moving to a new French supplier, which works partially in Britain. The identity of the Parisian firm is not known but it is understood to have a global manufacturing capability with operations in Bedford, Morocco, China and the US. It provides equipment for the majority of the business, with material such as packaging and bags sourced elsewhere.

Documents filed at Companies House show Ghd Group Holdings made a pre-tax loss of 4.9m in 2009 but this includes 14m in interest paid on debt as part of the 2007 buyout, as well as several major exceptional items and movements in foreign exchange, which have an effect as the firm holds assets in euros and American and Australian dollars.

The majority of interest paid is down to the capital structure of a leveraged backed business, with 9.7m of interest paid on loan notes held by investors and the remainder due to senior debt with banking partners.

Ghd has bought distributors in Brisbane and Sydney and in South Africa since 2008 which means its business is now entirely direct to market. It is understood that most of the 6.3m restructuring charges, listed as exceptional items on the balance sheet for the calendar year 2009, relate to a re-organisation of its operations, rather than to acquisitions. The company now has more than 670 staff worldwide.

Ghd also made a 1.6m donation to Breakthrough Breast Cancer last year, meaning its charity giving has now reached 7.5m, and paid 225,000 to settle a legal dispute relating to the termination of a distributor's contract in Spain.

The directors' report for 2009 describes it as a "year of transition for the group".

"In the context of a tough domestic market and tightening consumer spending across all markets, the directors are pleased to report that overall, the business delivered revenue growth at a group level and increased gross margins due to a change of supplier in the year.

"In 2009 we have restructured the weaker, underperforming areas of the business and significantly invested in others which should enable the group to be in a stronger position going forward to deliver sustainable future growth."

Ghd Group Holdings is the ultimate parent company for a string of companies related to the product and operating under the names of Ghd and Jemella.

A revolution in the industry

Ghd has revolutionised the hair and beauty industry since it was launched in 2001 and it has established successful international operations in Australia, South Africa, the US and around Europe.

Martin Penny, one of the leading figures behind the growth of Ghd, left the company in late 2008.

Mr Penny led the senior management team which acquired the company in 2007. The buyout was backed by private equity firm Montagu which acquired a significant equity stake alongside Mr Penny.

The deal saw Mr Penny and Montagu buying out Lloyds Development Capital, the private equity division of Lloyds TSB, which funded a buyout of minority shareholders in 2006.