Kelso Trading Update Out30 May 2024 07:10
Investments
Kelso has an increasingly balanced but concentrated pool of four core investments and will provide a more detailed market update in July 2024, following our June interim period end.
This month, we increased our holding in NCC Group Plc, the cybersecurity and software escrow business, to 2.5m shares with a total average in price of 119.5p. We were encouraged by NCC's software escrow division's capital markets day last month and look forward to their cyber security division's capital markets day in June. We believe the intrinsic value of the business units is considerably greater than the current market capitalisation.
Kelso's largest holding is THG Plc ("THG"), which we believe trades at a significant discount to its sum of the parts value. Specifically, we believe that enough credit has not been given to some of the brand value that it has been building on a global scale. The brands are within two growth sectors, Nutrition and Beauty. The Nutrition sector has benefited from larger companies who have been overly focussed on sugar and chocolate products, diversifying into healthier options as the world becomes more health conscious. Some of the world's most valuable brands in the Food, Beverage and Beauty sectors trade at high single-digit revenue multiples, whereas the entirety of THG trades on just over 0.5x revenue. We believe that MyProtein, MyVegan and MyVitamin specifically merit increased values with revenue at $875m dollars last year and are now extending their product ranges and geographical footprint, partly through global third-party partnerships. Additionally, we believe that the Beauty portal brands of Lookfantastic, Cult Beauty and Dermstore, with 8.5m active customers and over $1.0bn revenue, are very valuable assets in the global beauty arena. These portals sit alongside THG's own beauty brands.
On 21 May 2024, Kelso announced its intention to vote against Resolution 5, the re-election of the Chair, at the upcoming THG AGM. Kelso strongly believes that shareholder value would be significantly enhanced if THG were to fulfil its commitment to move to the Premium List from the Standard List, as promised on 18 October 2021, and provide clarification of the Group's future structure.