THG shares fall sharply after takeover approach from private equity group Apollo as losses hit £540m
- Matt Molding’s e-commerce retailer revealed it has made a £540m loss for 2022
- It reported impairments of £270 million in its beauty and technology divisions
- THG shares are down more than 80% since their listing on the LSE three years ago
THG losses nearly quadrupled last year after revenue growth slowed significantly and administrative costs soared.
Matt Molding’s e-commerce retailer reported a loss of £540m for 2022 on Tuesday, up from a loss of £138m last year, due to impairments of £270m across its beauty and tech segments.
THG shares fell sharply, pushing back Monday’s gains following news that the group was the subject of a “very preliminary and non-binding indicative” takeover proposal from Apollo Global Management.
Results: A day after confirming it was subject to a takeover approach, e-commerce retailer THG declared a loss of £540m for 2022, up from a loss of £138m last year
THG told investors that spending was accelerated by “unusually high” commodity prices, particularly whey, as well as acquisition costs and rising depreciation costs related to investments in new warehouses.
Although the group partially offset these additional expenses through price increases, margins were impacted by keeping prices in the food business at a reasonable level.
Total sales grew 2.7 per cent to £2.24 billion, partly due to difficult comparative periods last year when Covid-19 rules meant customers couldn’t buy many products in stores.
For the first quarter of 2023, THG’s sales fell 8.6 percent, largely due to a weaker performance of the beauty division.
THG shares were down 19.4 percent at 77.2 pence just before trading ended on Tuesday afternoon, after rising nearly half on Monday.
It follows two difficult years for THG, owner of the Dermstore, Cult Beauty and Myprotein brands, during which it struggled with corporate governance concerns, a slowdown in online shopping and pressure from short sellers.
Since listing on the London Stock Exchange in September 2020, the share price has plummeted by more than 80 percent, making it a ripe target for a takeover bid.
Molding, co-founder and CEO of THG, has said the listing was “not an experience I would recommend to anyone,” but has so far rejected any takeover bid for the company.
In April 2022, the Burnley-born boss said THG had received some “unacceptable” offers from third parties that “did not reflect the fair value of the group.”
Julie Palmer, partner at corporate restructuring specialist Begbies Traynor, said: “THG has been a darling of the lockdown thanks to its booming online retail, but adjusting to a normalizing world has proved a painful process for the company.”
She added: “THG founder Matt Molding has made no secret of his aversion to life as a publicly traded company and the scrutiny it entails.
“Should Apollo’s approach lead to a final offer, it could be a relief, not only for him, but also for THG’s long-suffering shareholders.”
Apollo’s interest in the retailer comes amid a frenzy of foreign interest in British listed companies, which are seen as relative bargains compared to their US counterparts.
After rejecting four previous proposals, John Wood Group has agreed to hold talks with Apollo after the latter made a £1.7bn bid for the oilfield service provider.
Veterinary products maker Dechra Pharmaceuticals, real estate fund Industrial REIT and payment services provider Network International are also currently targets of potential acquisitions.
Among the companies that have fallen into foreign hands in the past year are fashion retailer Ted Baker, repair specialist Homeserve and technology company Aveva, which was bought by French conglomerate Schneider Electric.