UK ecommerce group THG said it had received several “unacceptable” proposals for the company in recent weeks, as the once high-flying group warned that rising costs would curb profit growth this year.
Founder and chief executive Matthew Moulding said on Thursday that “the board has received indicative proposals from numerous parties” but “each and every proposal to date has been unacceptable, failing to reflect the fair value of the group”. He added that THG “is not currently in receipt of any approaches”.
After climbing 8 per cent at the open in London, the shares were flat in early trading on Thursday.
The company, previously known as The Hut Group, was one of the most celebrated technology IPOs in London when it floated in September 2020. But its shares have since lost four-fifths of their value amid investor concerns about governance and strategy and there has been speculation about private equity interest in the group.
THG provided no further details on the indicative proposals alongside its full-year results which showed adjusted earnings before interest, tax, depreciation and amortisation of £161.3mn. According to data compiled by the company, analysts had expected full-year adjusted earnings of £163mn.
For the current year, THG expects adjusted profit to be “broadly in line” with 2021 — a downgrade from analysts’ expectations of £206mn due largely to higher than expected cost inflation that was only partially offset by raising its own prices. Its forecast for sales growth of 22-25 per cent remains in place.
It had previously warned that profit margins in its nutrition and beauty divisions, whose brands include Myprotein, Lookfantastic and Glossybox, would contract due to rising cost inflation and adverse exchange rate movements.
But on Thursday it said the conflict in Ukraine and Covid-related lockdowns in Asia had pushed costs up further and disrupted transport and manufacturing.
THG pointed to “very encouraging” demand in the first quarter of the current year, with group sales rising 17 per cent, and said it expected margins to “return to 9 per cent to 10 per cent” in the medium term.
The margin was 7.4 per cent in the year just ended. Analysts at Citi expect that to fall to 6 per cent in 2022 but recover to about 8 per cent in 2023.
There was little mention of the option to sell a 19.9 per cent stake in its Ingenuity retail technology business to a division of SoftBank. The deal was struck last May but some analysts think the Japanese investment group is now unlikely to exercise it.
THG maintained its guidance for Ingenuity to generate sales of £108mn to £112mn in 2022, against £45.4mn in 2021 but revealed it had spent £11mn on restructuring to facilitate the eventual separation of Ingenuity and other divisions.
The company said it would move from the standard to the premium segment of the London Stock Exchange “at the appropriate time”. The move, which would allow its shares to be included in FTSE indices, was one of a number of measures announced during 2021 in response to the slide in its share price.
It also said it would unwind a “special share” takeover defence more quickly than planned. THG last month appointed media veteran Charles Allen as chair, calling time on an arrangement where billionaire co-founder Matthew Moulding acted as both chair and chief executive.
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