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(Alliance News) - THG PLC's stint on the London Stock Exchange has been tricky so far, but strong recent trading and efforts to improve its governance have not gone unnoticed by analysts.
THG shares surged 9.5% to 79.79 pence each in London on Wednesday afternoon. It now has a market capitalisation of GBP1.04 billion, making it a contender for FTSE 250 entry, should a premium London Stock Exchange listing materialise.
The Manchester-based e-commerce firm announced that it was notified by Founder and Chief Executive Officer Matthew Moulding that he has surrendered the special share he held earlier than expected. The special share will be cancelled by THG. It had been a sticking point to some investors, as the share had special voting rights attached.
THG had initially planned for the share to be relinquished in September. The share allowed Moulding to veto any takeover bid for three years. It has been unpopular with investors and blocks THG from joining the FTSE 100 or FTSE 250 indices.
"The group's intention in relation to moving to a premium listing remains as stated in its FY 2022 results in April, with timing subject to the final outcome of the FCA's review for reform of the listing regime," THG added.
Analysts at Jefferies said that THG is "continuing to actively address corporate governance concerns".
THG on Wednesday added Helen Jones, former vice chair of Ben & Jerry's board of directors USA, has been appointed as an independent non-executive director of THG with immediate effect.
Looking ahead, THG predicted that it will achieve adjusted earnings before interest, tax, depreciation, and amortisation between GBP44 million and GBP47 million for the first half of 2023. At best a 46% increase from GBP32.3 million a year prior.
THG said it expects a continuing adjusted Ebitda in the range of GBP47 million and GBP50 million. The continuing adjusted Ebitda figure excludes the OnDemand and ProBikeKit businesses.
ProBikeKit is an online seller of bike components, accessories, and clothing. It was acquired by THG in 2013. ProBikeKit is part of THG OnDemand, the lifestyle division that THG said in April it is planning to exit from by the end of the third-quarter of 2023. Sky News in May reported Frasers Group PLC was in talks to acquire the stock and intellectual property of ProBikeKit.
THG's free cash flow for the 12 months leading to June 30, was ahead of expectations, and expected to be an estimated GBP40 million outflow.
The company expects to deliver free cash flow neutrality for 2023, after a GBP63 million outflow in 2022.
Jefferies analysts added: "Cash generation has been 'ahead of expectations', and tangible progress on corporate governance continues to be made.
"We retain our positive stance on THG, continuing to believe that the major inputs that contributed to the downgrades through 2022 are now turning into tailwinds, and seeing considerable value and growth potential in the market-leading strategic assets owned by the group."
Jefferies rates the stock at 'buy' with a 95.00p price target, lifted from 85p.
By Eric Cunha, Alliance News news editor
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