THG shares plunge despite firm announcing plans to spin off its technology division

Troubled THG failed to avoid a sell-off in its shares yesterday despite announcing plans to spin off its technology division.

The beauty and nutrition group, formerly known as The Hut Group, said it was “progressing with options” to spin off its Ingenuity business, a move that will help shore up its finances.

But the announcement was accompanied by dismal financial results that led analysts to lower their profit forecasts.

The shares fell 12.4 per cent, or 7.95 pence, to 56.3 pence yesterday. They are down 24.7 per cent so far this year.

Chief executive Matt Moulding said the company was looking to spin off Ingenuity “following extensive discussions with shareholders over the past 12 months.”

This will allow THG to focus on its “highly profitable and cash-generative global beauty and nutrition businesses,” he added.

The relevant tax authorisations had been received and “the necessary separation work had been carried out in advance”.

The retailer operates brands such as LookFantastic and MyProtein. Its Ingenuity division provides logistics services to other companies.

Yesterday, it said full-year profits would be “towards the lower end” of analysts’ expectations of £133.8m and £156.5m.

This was due to poor trading performances at its nutrition division, including MyProtein, which sells powders and shakes. Sales fell 7.5 per cent to £299m in the first half of 2024.

This prompted Jefferies analysts to cut annual profit estimates from £150m to £131m.

They said the nutrition division was “offsetting much of the progress in other areas,” but the same note said a spinoff of Ingenuity “could generate significant value for shareholders.”

The update was also criticised by Panmure Liberum, which called the nutrition unit “disappointing” and cut profit forecasts by 14 percent.

The spin-off was “potentially very good news” but analysts would wait for more details on financing before making a final verdict, Panmure Liberum said.

Dan Coatsworth, investment analyst at broker AJ Bell, said: “Until we get more information, the market will be more focused on day-to-day business and the latest results are not great, hence the negative share price reaction.”

But the market welcomed THG’s update that it would move to a new listing tier on the London Stock Exchange, meaning the shares could be added to the FTSE 250 as early as December.