THG plans divestment of Ingenuity technology unit as retailer struggles to boost shareholder value

THG is in talks to spin off its technology business as part of broader efforts to revive shareholder value after four difficult years as a listed company.

The group, whose 2020 market debut was the biggest London listing in seven years, told shareholders on Tuesday it is “actively undertaking detailed work” to “facilitate the demerger of THG Ingenuity”.

THG has been carrying out a restructuring as part of a strategic review of its loss-making units, having issued several profit warnings following its IPO as trading suffered from runaway inflation and poor consumer strength.

In a brief statement, the owner of Lookfantastic and Myprotein said there could be no certainty about the timeline but that the structured tax clearances had already been approved by HMRC.

He added: “In line with THG’s stated strategy of maximising shareholder value, and following extensive shareholder engagement, the group announces that it is actively undertaking detailed work to review potential structures to facilitate the demerger of THG Ingenuity.”

The announcement came after the group reported a drop in overall revenue, largely driven by a 10.9 percent decline in nutrition sales and rising debt during the first half of the year.

THG Beauty sales continued to drive the group’s results, rising 5.7 per cent to £531m, while the Ingenuity business increased 12.6 per cent to £80.2m.

The Ingenuity spinoff would leave THG with the company’s lucrative beauty and nutrition businesses.

Ingenuity is an e-commerce solutions provider and lists Matalan, L’Oreal, Nestlé and Coca-Cola as clients on its website.

THG shares fell 3.7 percent to 61.85 pence in early trading, taking 2024 losses to just under 17 percent and since-listing losses to a staggering 92.2 percent.

Peel Hunt analysts said they had been expecting a spin-off of one of THG’s consumer divisions, “most likely Nutrition”, but added that the Ingenuity spin-off “has the potential to have the biggest impact on valuation”.

They added: ‘THG Nutrition, with Myprotein, and THG Beauty, with Lookfantastic, Cult Beauty, Dermstore and the prestigious portfolio of brands, are market-leading propositions that are profitable and cash generative, capable of sustaining dividends.

“We expect the details of the structure, service agreements and balance sheets to be key.”

Mark Crouch, market analyst at eToro, said: ‘2024 was expected to be the year THG revived, having been in a slowdown since its IPO in 2020, with the share price falling 90 per cent in that time.

‘However, circumstances have not been favourable for the online retailer, which has had to navigate a cost-of-living crisis and a period of high inflation, forcing consumers to cut back on discretionary spending.

‘As central banks begin to cut interest rates, easing pressure on consumers, shareholders will cling to the hope that this marks the beginning of THG’s recovery.’