Shares in THG plunge despite the firm announcing plans to spin off its technology arm

Troubled THG failed to stave off a share sell-off yesterday despite announcing plans to spin off its technology arm.

The beauty and nutrition group, formerly known as The Hut Group, said it was ‘progressing options’ to demerge its Ingenuity business – a move that will help shore up its finances.

But the announcement came alongside dire financial results which led analysts to downgrade their profit forecasts.

Shares fell 12.4 per cent, or 7.95p, to 56.3p yesterday. They are down by 24.7 per cent for the year to date.

Chief executive Matt Moulding said that the company was looking to spin off Ingenuity ‘after extensive discussions with shareholders over the past 12 months’.

That will leave THG to focus on its ‘highly profitable and cash generative global beauty and nutrition businesses’ he added.

Appropriate tax clearances had been received and ‘necessary separation work has previously been undertaken’. 

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

Yesterday, it said annual profits would be ‘towards the lower end’ of analysts’ expectations for £133.8million and £156.5million.

This was down to poor trading in its nutrition arm, including MyProtein, which sells powder and shakes. Sales fell 7.5 per cent to £299million over the first half of 2024.

Under pressure: THG chief exec Matt Moulding

This triggered analysts at Jefferies to cut annual profit estimates from £150million to £131million. 

They said the nutrition arm was ‘offsetting much of the progress elsewhere’. But the same note said an Ingenuity demerger ‘could unlock meaningful value for shareholders’.

And the update was also picked apart by Panmure Liberum, which dubbed the nutrition unit ‘disappointing’ and downgraded profit forecasts by 14 per cent.

The demerger was ‘potentially very good news’ but analysts would await further details on financing before making a definitive verdict, Panmure Liberum said. 

Dan Coatsworth, investment analyst at broker AJ Bell, said: ‘Until we get more information, the market will focus more on the day-to-day business and the latest results aren’t great, hence the negative share price reaction.’

But the market welcomed THG’s update that it would transfer to a new category of London stock market listing. This means the shares would be up for addition into the FTSE 250 as soon as December.

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