THG is looking to raise £75 million to facilitate the demerger of its technology infrastructure arm Ingenuity from its eCommerce business.
Ingenuity, which provides logistics services to the likes of high street giant Frasers Group – and THG itself, its largest client – has 4,000 staff and 12 distribution centres globally.
Analysts suggest it will take 3-5 years for the capital-intensive company to break even and that it is likely to require significant additional funding. Therefore taking the business private would allow THG to retain the material free cashflow generated by its other operations.
Manchester-headquartered THG confirmed plans to demerge Ingenuity into a standalone independent private entity; the launch of the equity raise through a placing, subscription and retail offer; and mixed Q3 results once trading on the stock market had closed for the day.
THG says the fundraising will support Ingenuity with “sufficient medium-term funding” as it approaches positive cash generation on a standalone basis.
Post demerger, the group would consist of its two consumer businesses THG Beauty and THG Nutrition, which are highly profitable, cash generative and capable of paying dividends.
For the period ended 30th September 2024, revenue in THG Beauty climbed 2.3% to £255m, while THG Ingenuity revenue was up 15% to £44m. However THG Nutrition revenue dropped 13.1% to £135m.
Full-year performance is expected to be within the company consensus range, THG stated.
“Today we have separately announced significant progress on our strategy to demerge THG Ingenuity into a private company supported by major shareholders,” said CEO Matt Moulding.
“THG plc will remain a listed leading consumer brands group, with our planned transfer to the ESCC [segment of the London Stock Exchange] well on track.
“It was especially pleasing to see another solid quarter of delivery from both our beauty and Ingenuity businesses, rewarding the significant overhaul of their respective operating models during 2022 and 2023.
“The short-term disruption from the major rebrand of Myprotein is now behind us, and we were pleased that in September nutrition delivered its best sales performance since January.
“We are also proud to be recognised in the top 250 companies worldwide for our contribution and efforts in sustainability thanks to our ongoing progress towards our net zero goals.
“Preparations for our busiest trading period are well advanced with efficiencies across the network over the last twelve months delivering further benefits for our Ingenuity clients to aid new customer acquisition.”
THG went public in 2020 at a valuation of over £5 billion but has since seen its market cap drop to around £688 million.