Oct 27, 2021
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THG share plunge continues after update

Oct 27, 2021

THG can’t seem to catch a break at the moment. After it reported strong figures in its latest update, the company’s share price continued to plummet, dropping from over £3 each at the previous day’s close to less than £2.40 each in early trading. It wiped over £800 million from its value.

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That was on Tuesday and the shares rose slightly on Wednesday but it was only a partial recovery, meaning that the firm’s market capitalisation is currently under £3 billion, less than third of its value earlier this year.

As mentioned, the business had delivered yet another good performance and it also moved to address the corporate governance issues about which investors had been concerned. 

After founder Matthew Moulding had earlier said he was giving up his ‘golden share’ that gave him extra voting rights, the company has also said it will take on an independent chairman. And it added that a Softbank executive is joining the board, underlining the Japanese tech giant’s commitment to its investment in the firm.

But investors and analysts focused more on the fact that growth isn’t happening as fast as it used to and that margins are being pressured. 

Numis analyst Simon Bowler said in a note: “The strong order book is encouraging but fails to offset the worsening momentum and worsening cash profile of the core businesses.”

Analysts at Jefferies were little more upbeat but still recognised the issues as they said: “THG's Q3 update should reassure on Ingenuity progress and the strength of the Softbank relationship. A slowdown in Nutrition sales looks matched by accelerating Beauty. But we note margin challenges from input and foreign exchange pressures (mismatched resell prices and cost increases, especially in Asia).”

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