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(Alliance News) - Kelso Group Holdings PLC has snapped up a 0.4% stake in THG PLC, believing the online beauty products retailer to be "undervalued" after a difficult two years on the London Stock Exchange.
Manchester-based THG made its equity market debut in September 2020 at 500 pence per share. The stock was up 4.1% at 56.65p on Tuesday morning in London, still down almost 90% from its initial public offering price.
Kelso shares were flat at 5.00p each.
Kelso is an investment firm focused on UK small and mid-cap companies. It said it has bought 5.0 million shares in THG at an average price of 54.5p, so forking out around GBP2.7 million in total. The 0.4% stake represents Kelso's maiden investment in THG.
Kelso explained: "The board of Kelso believes that THG is a hugely exciting but significantly undervalued business. Matthew Moulding the THG founder and CEO has built a business with true global scale in two global growth sectors of Nutrition and Beauty employing around 8,000 employees with 18 fulfilment centres shipping to 195 destinations."
Kelso believes THG's board additions will "pay dividends in 2023". THG added Charles Allen as independent non-executive chair back in March of last year. THG earlier in January named Damian Sanders as chief financial officer, a "positive" addition to the company's executive team, Kelso commented.
"Kelso believes that the current stock market value does not reflect the underlying value of the sum of each of the main THG divisions," the investor said.
Life as a listed company has been far from plain-sailing for THG since its debut in September 2020.
A capital markets day in October 2021, made to shore up investor confidence, spooked traders instead. THG's stock has faced heavy selling pressure since then.
Trading updates since then have been mixed at best. Earlier this month, THG cut earnings guidance. It now expects that adjusted earnings before interest, tax, depreciation and amortisation for 2022, on a continuing basis, will be GBP70 million to GBP80 million, in line with current market expectations.
Back in September, THG had guided 2022 adjusted Ebitda of GBP100 million to GBP130 million, so the new range is down by 30% to 38%. Adjusted Ebitda in 2021 was GBP161.3 million, while THG's pretax loss was GBP138.1 million.
By Eric Cunha, Alliance News news editor
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