Member Info for Joner

I’ve been in since Jan20 at 76p and just watched the share price drift downwards ever since and I honestly don’t know what will turn this around, it feels like they’re just finish with one pet project and then onto the next one with nothing commercially substantial actually being achieved.

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Orlebarbrown.com

Cont…
However, into period end and post period, the share price suffered heavy selling pressure reaching c121p in January 2022. While well documented, the reasons appear to centre around:

· concerns over corporate governance;
· uncertainty surrounding the possible exercise of the SoftBank option to buy 19.9% of Ingenuity and the implicit £4.5 billion valuation of the division, as well as prospects for its future growth; and
· a modest, downgrade to EBITDA mainly FX driven.

In response, THG has:

· made several moves designed to improve corporate governance, including: a commitment to rescind the founder's Golden Share, which effectively prevents an unwanted takeover in the next two years, and splitting the role of CEO and Chairman, with a process underway to identify an independent candidate to fill the latter;
· appointed a SoftBank representative to its board; and
· upgraded expectations for Ingenuity growth.

As the representative of major shareholders, we engaged with the company to understand and support its plans, particularly in respect of corporate governance, and we are encouraged by the company's optimism surrounding Ingenuity. As part of our normal process, we have revisited our investment case and believe there has been no substantive change to the investment thesis since IPO. Given the current valuation, we believe there is significant upside potential in THG shares, and as a result, have topped up the Company's position in THG following the year end.

THG plc

The bulk of THG revenue is associated with its beauty and nutrition divisions, which sell own and third party brands around the world. However, we believe much of the future growth story at THG centres around its ecommerce and logistics platform - Ingenuity - which powers both THG's own operations, as well as offering its service to external parties. For many companies, building their own ecommerce offering can be a significant investment, with no certainty of adequate returns. Ingenuity solves this problem, by offering a one-stop shop for companies looking for a cost-effective solution to get online or open new global markets.

Considerable activity has occurred at THG since its IPO in September 2020.

Over the course of the year, it has made several acquisitions mainly to bolt onto its existing beauty operations, including:

· Perricone (September 2020), a US prestige skincare brand for $60 million, effectively a 1x continuing sales multiple;

· Dermstore.com (December 2020), the US number one online retailer of prestige skincare and speciality beauty brands for $350m, implying a forward 12 months' revenue multiple of c1.8x;

· Brighter Foods (April 2021), a developer and manufacturer of snack bars, which was already working with THG's nutrition arm. Consideration was £43 million with expected £20 million revenue and £6.5 million EBITDA contributions in 2022;

· Bentley Laboratories (May 2021), a developer and manufacturer of prestige skin and haircare products. The total consideration was $255 million with an expected impact of $77 million of revenues and $15 million of EBITDA in 2022; and

· Cult Beauty (August 2021), a UK based online beauty retailer to broaden customer choice compared to THG's existing beauty sites. The total consideration was £275 million and Cult Beauty is expected to add approximately £140 million of sales and £10 million EBITDA in 2022.

M&A was one of the main drivers for THG's listing, and execution of this part of its strategy has been rapid.

Elsewhere, Ingenuity - THG's ecommerce solutions platform - announced a partnership with SoftBank, which saw the Japanese conglomerate inject approximately $730 million into a fund raise of over $1 billion. In addition, an option was granted to SoftBank to enable it to inject a further $1.6 billion into Ingenuity at an implied pre new-money valuation of $6.3 billion for the division, which is due to be separated from the group.

Ingenuity - THG's proprietary ecommerce and logistics platform - provides services to both THG's beauty and nutrition divisions, but has also begun to offer them to third parties. The growth available in this market is substantial, we believe, and the division is growing from a small base of revenues. This has made it hard for the stock market to value accurately, and we saw the SoftBank investment as endorsement of the growth potential and valuation of Ingenuity.

Must be due an update sometime soon?

Old Fool pop me down for 33p spike 38p
Thanks

Any thoughts on why we need a joint Broker - what do Davy bring to the party, that Liberium don’t already have?

I’m less worried I have to say OB - I take some comfort from how peers have done - worth looking at Ulta Beauty in the States and the multiples that business is valued at - and their headlines talking about the resilience of the the Beauty Sector in the last couple of weeks, link in the positivity re Black Friday and Cyber Monday. I managed to average down yesterday picking up some more at 166.5p

Totally Unrelated

Great work today Mando - appreciate the research.

From today’s RNS:

As the representative of major shareholders, the Investment Adviser has engaged with the company to support its plans, particularly in respect of corporate governance, and is encouraged by the company's optimism surrounding Ingenuity. As part of its normal process, the Investment Adviser has revisited its investment case and believes there has been no substantive change to the investment thesis since IPO. Given the current valuation, the Investment Adviser believes there is significant upside potential in THG shares. As a result, it has increased the Company's position in THG following the quarter end.

Just thinking aloud what would be the impact if in the near future the company deployed some liquidity to buying back its own shares?

Obviously continuing to deliver on the great numbers is key in the first instance

Or alternatively go into bat for the loyal shareholders who have stuck with the business during what has been horrific manipulation of the share.

I would imagine that THG are on the phone to their “Learned Friends” as we speak.

Now there’s a plot twist!

Non Story - they’ll have insurance for this stuff.

Managed to find some loose change down the back of the sofa to top up again. Silly season.

No idea but 204

I think there’ll be volatility and this sort of BS for the next 3 - 6 months until the separation of the businesses is cleared up

- which by the ways I think is more straightforward than the naysayers would have us believe- the way I see it is that the businesses are separated and Beauty and nutrition pay a simple low single digit royalty to the tech side for the platform.

I obviously hope for a rapid upwards movement, but happy to sit on my hands in the meantime.

It’s fair to say that this is not one for the bed-wetters out there