(Bloomberg) -- THG Plc’s plans to demerge its technology platform and switch the listing of its core beauty and nutrition business were not enough to prevent its share price falling further as the e-commerce company’s earnings missed estimates.
The technology division known as Ingenuity provides online commerce services to other retailers. If spun off, it would leave THG with its beauty and nutrition arms, which it described as profitable and cash-generative in a statement Tuesday morning.
It follows a deal in June to sell luxury brands, which include Coggles, to Mike Ashley’s Frasers Group Plc.
Shares in THG, previously known as The Hut Group, fell more than 10% in London on Tuesday as it separately issued earnings and guidance that disappointed investors. The company has endured a bruising time on the stock market, falling about 90% since a listing in 2020 that valued THG at more than £5 billion ($6.6 billion).
Adjusted earnings before interest, taxes, depreciation and amortization rose 3.6% to £48.8 million in the first six months of 2024 from a year earlier, but were below analysts’ expectations. THG also said earnings for the year will be at the lower end of estimates.
Analysts from Panmure Liberum said the results were disappointing, “with nutrition profitability much softer than expected and beauty growth slowing despite a favorable market backdrop.” The spinoff is potentially good news, but it’s unclear how the Ingenuity division, “which loses significant cash every year,” would be funded under the plans, the analysts added.
Vocal Critic
THG, which owns brands such as Lookfantastic, plans to transfer its listing to a category that would allow it to be included in FTSE benchmarks. The stock is currently part of a “transition” category following the introduction of new rules from the Financial Conduct Authority that came into effect in July.
The FCA is changing the UK’s listing rules in an attempt to boost the attractiveness of the City of London, amid fears of its dwindling status among global public companies.
THG wants to move to the equity shares (commercial companies) category, which would allow it to be considered for inclusion in the FTSE UK Index Series, raising its visibility.
Chief Executive Officer Matt Moulding has been a vocal critic of the London market, including coverage from journalists, and has said he regrets listing THG. Last year, the company bought free newspaper City A.M. in a deal that surprised investors.
--With assistance from Lisa Pham.
(Updates with share price and additional detail.)
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