THG Plc shares reversed an earlier decline after the founder of the troubled e-commerce company talked up the future prospects for its beauty, nutrition and Ingenuity technology arms.
(Bloomberg) — THG Plc shares reversed an earlier decline after the founder of the troubled e-commerce company talked up the future prospects for its beauty, nutrition and Ingenuity technology arms.
Chief Executive Officer Matthew Moulding said THG is making “progress on numerous fronts” with sales in its beauty division recovering, cash flow increasing and a strong pipeline of growth anticipated in its core nutrition arm and Ingenuity units, in a call with analysts.
After falling as much as 7% in early trading, THG, formerly known as The Hut Group, was up more than 7% at 10:25 a.m. in London.
THG, which runs hundreds of beauty and lifestyle websites, has had a bumpy ride since its 2020 listing due to governance concerns, price surges for whey — a key ingredient in its protein shakes — and losses at Ingenuity.
The company’s stock is highly volatile and fell earlier after reporting a slowdown in nutrition in the third quarter as a rebranding initiative temporarily reduced new product launches. When THG floated, much of its valuation was based on the future promise of its Ingenuity platform, which helps third-party retailers fulfill orders, and revenue in this unit also fell in the third quarter.
However, THG pointed to a return to growth in monthly revenue, with sales up 3.2% in constant currencies in September, as stock buildup in the beauty unit receded. The company said its nutrition business is leading the market and it has a strong pipeline of business for Ingenuity.
Moulding said THG has become cash generative 15 months ahead of plan as he maintained a reduced forecast for full-year revenue growth of 0% to -5% from continuing businesses.
“As we’ve been consistently saying, what we’ve been most focused on over the past 12 months is making sure that the balance sheet is strong, and that cash generation is strong,” said Moulding. “I think you get the impression we’re very pleased with how things are in the business.”
Moulding is slowly loosening his tight grip on the company as a major shareholder, landlord and chief executive, and has relinquished the role of chairman and given up his golden share, which would have allowed him to veto a takeover. THG is also moving to the premium segment of London’s Stock Exchange.
Read More: THG Founder Moulding Gives Up ‘Golden Share’ in Latest Overhaul
Takeover speculation has swirled around THG since its share price plummeted, profit warnings started to mount, and Moulding said he regretted floating the company and hinted he may take the business private again. Entrepreneur Nick Candy last year walked away from making an offer for THG, as did a rival consortium consisting of Belerion Capital and King Street Capital Management. More recently, the company rebuffed a takeover approach from Apollo Global Management Inc.
Earlier this year, THG began a strategic review of unprofitable businesses in a bid to lower costs and streamline operations.
“While the fourth quarter needs to be strong to hit full-year numbers, the direction of travel suggests all is on track with September back in growth,” said Wayne Brown, an analyst at Liberum. “We think the bottom of the earnings cycle has passed.”
(Updates with share price movement, additional analyst quote in final paragraph.)
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