RE: New times article ..midnight..18 Oct 2023 06:59
THG, the online beauty and nutrition business, has told investors it will deliver on its financial targets for the full year as it considers a spin-off of its Myprotein brand.
The group said in a trading update that revenues would decline by no more than 5 per cent in the full year after initially downgrading sales forecasts in September.
The sales in THG’s beauty division were down by 4.4 per cent to £272 million and sales of nutrition products were down by 4.6 per cent to £156.2 million. The revenue from THG’s Ingenuity platform, which markets third-party brands to customers, fell by 8.8 per cent to £155.7 million for the three months ended September 30. THG’s shares closed up 3p, or 4.4 per cent, to 69¾p.
The company, formerly known as The Hut Group, is considering listing its Myprotein division in the US after activist investors suggested spinning off the business. Kelso Group, which holds a stake of about 0.55 per cent, has urged THG to realise the “significant intrinsic value” of its nutrition arm.
Matthew Moulding founded The Hut Group in 2004 and built the company into an online beauty and nutrition business. The company floated on the London Stock Exchange at a valuation of £5.4 billion in 2020. Its share price has faltered since as it faced concerns about governance and financial losses.
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Analysts at Liberum said “the bottom of the earnings cycle has passed” for THG, and that all three of the company’s divisions would help improve margins over the next three years.
They said: “[The] successful completion of the group’s three-year global infrastructure roll-out, and the strong efficiencies these investments are delivering, mean we now anticipate full-year capital expenditure will be around £30 million less than previously guided.”
The analysts said margins should improve in THG’s beauty division in the second half of the year after the group reduced costs in its manufacturing business and started automating its warehouse in the US.
Meanwhile, THG’s Ingenuity platform has delivered a contract with Maximo Group, an online beauty retailer. The platform has also secured contracts with L’Oréal, L-Fashion Group and a number of Australian beauty brands.
Analysts at Numis said: “Management were pleased with the acceleration in growth despite the focus on profitability. Performance in beauty was the highlight, with growth expected to remain positive in the fourth quarter.
“The slowdown in nutrition reflected headwinds from the rebrand — and slowdown in product launches — as well as a trading stance to focus on margins.”
Moulding said: “The pivots made within each division to ensure they thrive in a high-inflation global environment are bearing fruit. We remain focused on restoring margins to pre-inflation levels while continuing to focus on cash generation.
“Both our operations and inventory are well positioned ahead of peak trading, with the benefi
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