RE: I’m in23 May 2025 22:22
Kelso holds 6.4 million shares in THG plc ("THG"), valued at approximately £1.8 million based on the current share price of c.28p. This investment represents c.25% of our portfolio.
In December 2024, THG completed the demerger of its Ingenuity division, streamlining its operations to focus on its core, cash-generative Beauty and Nutrition segments. In our view, this significantly simplifies the investment analysis and we find the resulting business, with its strong cashflows, simpler to value and a much more attractive proposition for market investors.
Subsequently, THG completed a debt refinancing, reducing net debt from 3.2x to 2.2x based on FY 2024 adjusted EBITDA of £92 million (excluding Ingenuity). Alongside this, the company carried out a £90 million equity fundraise, with CEO Matthew Moulding contributing £60 million, demonstrating his strong support and confidence in the business. We believe this personal investment is one of the largest ever on market investments by an individual director into any UK listed company. We also note that Frasers' has been building a stake and recently announced an 11% position. The refinancing was possible, in part, due to THG's localised US manufacturing model, which will largely insulate the business from the impact of the recently announced US tariffs.
In March 2025, THG was included in the Premium Index of the London Stock Exchange, resulting in inclusion in the FTSE 250 index. The benefits of this have not yet been seen in the share price but we believe it will enhance the company's visibility and attract increased interest from institutional investors.
Despite recent share price underperformance, we continue to believe that the value of the remaining divisions, being a world leading Beauty business and one of the world's largest Nutrition brands, is much greater than the current market capitalisation of c.£380 million.
The company's Nutrition division, principally the MyProtein brand, is one of the world's largest in its category and can more easily be benchmarked against many other global sector transactions. Recent product diversification and industry partnerships, particularly in offline channels, have yet to be fully reflected in the market valuation. Kelso believes that, in time, the brand-driven value of MyProtein will be recognised by the market, with the division alone comfortably justifying a valuation in excess of THG's current market capitalization
Despite the recent share price fall, we believe that there will ultimately be a positive step change to the value of THG. We continue to believe that the valuation uplift in THG will be more readily realised when the Beauty and Nutrition businesses become two independent businesses. Such a strategic move would unlock significant shareholder value.
Sign In
Follow the stocks
