Listed Manchester firm THG plans to demerge its technology infrastructure arm Ingenuity from its eCommerce business.
Ingenuity, which provides logistics services to the likes of high street giant Frasers Group, 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.
THG Ingenuity appointed its own chairman in Alastair Crane last year. THG PLC told the London Stock Exchange this morning that it was progressing these plans “following extensive shareholder engagement”.
“At this stage no certainty can be provided on a demerger timescale whilst we consider the options to achieve this outcome; however, structuring tax clearances have now been approved by HMRC,” it continued.
“Any proposed demerger is expected to require shareholder approval.”
Post any 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.
In a separate notice to the LSE this morning, THG PLC said it had appointed a sponsor to recategorise its shares on the recently reformed premium segment of the London stock market.
Transferring its ordinary shares from the equity shares category of the Official List – maintained by the Financial Conduct Authority – to the equity shares (commercial companies) category of the Official List is expected to bolster liquidity in the stock.
THG said the ESCC transfer, which does not require shareholder approval, should be completed no later than March 2025 and would enable the shares to be considered for inclusion in the FTSE UK Index Series.
“Following the completion of the FCA listing regime review, we are taking the appropriate steps to transfer to the ESCC category,” said Matthew Moulding, CEO of THG, who has been a vocal critic of the red tape around companies listed in London.
“We welcome the output to simplify the listing regime, and expect the group to be eligible for inclusion in the FTSE UK Index Series,” he added.
THG also reported its interim results for the six months ended 30th June 2024. The group saw continuing revenue and adjusted EBITDA growth of +2.2% and +1.6% respectively.
“Reporting another six-month period of continuing sales and adjusted EBITDA growth was especially pleasing given the FX headwinds suffered within our Nutrition business, which negatively impacted H1 profitability by a further c.£5m,” said Moulding.
“Local manufacturing and fulfilment is now live in Japan which will steadily scale to reduce exposure.”
“Momentum in Nutrition is especially pleasing, with an expected return to revenue growth in September, providing a strong platform for both peak trading and the year ahead.”
THG went public in 2020 at a valuation of over £5 billion but has since seen its market cap drop to around £900 million.