THG is in talks to demerge its tech business as part of wider efforts to revive shareholder value after a bruising four years as a listed business.
The group, whose 2020 market debut was the largest London listing in seven years, told shareholders on Tuesday it is ‘actively undertaking detailed work’ in order to ‘facilitate the demerger of THG Ingenuity’.
THG has undertaken a restructuring as part of a strategic review of its loss-making units, having issued several profit warnings post-IPO as trade suffered rampant inflation and poor consumer strength.
THG shares have fallen more than 90% since their 2020 market debut
In a short statement, the Lookfantastic and Myprotein owner said there can be no certainty on timescale but structuring tax clearances have already been approved by HMRC.
It added: ‘Pursuant to THG’s stated strategy to maximise shareholder value, and following extensive shareholder engagement, the group announces that it is actively undertaking detailed work to review potential structures to facilitate the demerger of THG Ingenuity.’
The announcement came as the group posted falling total revenue, driven largely by a 10.9 per cent decline in nutrition sales, and rising debt for the first half of the year.
THG Beauty sales continue to drive the group’s bottom line, rising 5.7 per cent to £531million, while the Ingenuity business was up 12.6 per cent to £80.2million.
The demerger of Ingenuity would leave THG with the profit making beauty and nutrition businesses.
Ingenuity is an ecommerce solutions provider and on its website, lists Matalan, L’Oreal, Nestle and Coca-Cola as customers.
THG shares were down 3.7 per cent to 61.85p in early trading, bringing 2024 losses to just shy of 17 per cent and losses since listing to an eye-watering 92.2 per cent.
Analysts at Peel Hunt said they had been expecting a spin-out of one of THG’s consumer divisions, ‘most likely Nutrition’, but added the demerger of Ingenuity ‘has the potential to have the biggest impact on valuation’.
They added: ‘THG Nutrition, with Myprotein, and THG Beauty, with Lookfantastic, Cult Beauty, Dermstore and the prestige brand portfolio, are market-leading propositions that are profitable and cash-generative, capable of supporting dividends.
‘We expect that details of the structure, service agreements and balance sheets will be key.’
Mark Crouch, market analyst at eToro, said: ‘It was hoped that 2024 would be the year that would revive THG, which has been on the back foot since its 2020 IPO with the share price tumbling 90 per cent in that time.
‘Circumstances though have not been favourable to the online retailer, having to navigate through a cost-of-living crisis and a period of high inflation, which forced consumers to cut back on discretionary spending.
‘So as central banks begin cutting interest rates, easing pressure on consumers, shareholders will be clinging to the hope that this marks the beginning of THG’s turnaround.’
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