The Hut Group (THG) - Share Chat

Well 2021 will be a year Matt Moulding will want to forget, even if December provided some (very) light relief.

DEC Open ; 176.10
DEC Close ; 229.20
DEC Perf ; +29.6%
YTD Perf ; -70.6%

January will be a crucial month for our recovery hopes for the THG share price with a number of important issues to be addressed.

  1. Governance : Still no public announcements on the search for an independent Chairman. Perhaps its proving difficult to find the right candidate or perhaps the ‘going private’ rumours have substance and will negate the need for a new Chairman.

  2. Revenue : Analysts figures predict revenue to be in the range £2.18bn - £2.23bn which would be up c.37% for the full year. These figures have barely changed since the Q3 update so you would expect they are baked inn to the current sp.

  3. EBITDA : Projected to be £174m - £179m a margin of about 8%. The question is how aggressive the accounting was to arrive at this figure, which we likely won’t know till mid April. Basically the market is dubious of the items not used to achieve an attractive EBITDA figure.

  1. Ingenuity : Is this the goose that lays the golden egg ?? THG needs to detail Ingenuity in granular detail to convince the market that it is a gamechanger. Total Clients, New Clients Won, Clients in Pipeline, Recurring Revenues, Estimated Margin for Ingenuity and Projected profitability date for the division. Matalan and Homebase has increased the divisions visibility recently now we need to see transparency in the figures.

  2. Spin Offs : The oft repeated intention of spinning off/selling Beauty and/or Protein needs to be clarified. Solid plans laid out with expected valuation and what will be done with the proceeds I.e. Special Dividend or shares in new entity for existing holders etc etc

  3. Softbank : Personally I don’t see any issue with Softbank not taking up their Ingenuity option, as the name suggests it is just an option, not an obligation. But I can see why MM saying “maybe they will, maybe they wont” is just another uncertainty that the SP could do without.

  4. Cashburn : Is THG likely to need to borrow or dilute equity to raise funds to continue its growth path ?? As the Company is not currently profitable is there a clear path to profitability or is the current growth just zero margin M&A sales.

  1. Going Private : This one just won’t go away I’m afraid. With MM’s comments in the GQ interview and recent Bloomberg and Times articles confirming the company have discussed it. Appointing the new Chairman or detailing Spin off/sell off plans would help this one fade into the background.

So there are quite a few issues there which all contribute to the uncertainty around THG. I have a large holding (for me) of shares which are about 3% up at the minute, but I had expected them to be a lot further north by yearend. I’m sure £2.50 is achievable by the trading update on 18th January and after that who knows what it will do.

Hope you enjoyed the write up, just my thoughts on this very very strange share. As always you should do your own research as this is just my opinion on the issues affecting this share.

Happy New Year and Good Luck to all holders.

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Brilliant post @MarekQ

I find it amazing that a man like MM has built a business this large yet seem so unable to handle being in charge of a public company.

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Thanks @NeilB

I just wanted to try and put all the issues and different factors in the one place, and writing it all down provided some order and clarity in my mind.

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Short positions are increasing again.

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@Drew

Not sure what to make of this article this morning.

The journo claims 4% of THG shares are on loan, so that’s about 49 million shares !!!

The FCA short tracker says that 1.28% of shares are on loan (But this is ONLY disclosures above 0.5%), at 31st December.

Euroclear lists 7.85% of shares on loan at 30th Nov, these update monthly.

“By last Wednesday, the number of short positions had doubled in just 16 days to 4 per cent of the stock, according to data from research firm IHS Markit for The Mail on Sunday.”

So he claims between 13th and 29th Dec the shorts increased by 2.72%.

On 13th Dec SP closed at £1.8020 and on the 29th Dec it closed at £2.1920. An increase of 21% with 25 million shares sold to short ??? The total volume traded over this period was approx 80million

All seems very strange, it could of course be genuine and the increasing short positions represent a bet on the FY21 results being disappointing.

Ten trading days left till trading update at an average volume of 7million per day is normal trading of 70million. Should be fairly easy to spot if they start closing positions.

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Looks like they maybe betting there is no good news in the update which will probably push the share price down some. Am hopeful of some good news coming in the update myself which keeps the upward momentum going.

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@Drew

Yeah I think the FY trading update needs to be very good to generate upward momentum.

Currently £3bn market cap (share price £2.47) seems to me to be ‘fair value’ pre trading update.

Just an interesting side note, a US listing may be on the way as the Wall St journal seems to have reserved space for it, ticker : THGPF (U.S.: OTC)

Got to say i’m gutted about the way they’ve handled things at THG - I almost dropped £10k on this last year and it’s down 72% on what I did buy - it’s absolute junk tbh. Whatever they’ve done up there they’ve ruined this brand

Q4 trading update. Haven’t had chance to read through it fully yet.

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THG have said that its margins are expected to be 7.4% - 7.7%, analysts’ expected 7.9%.

This is a substantial over reaction in my opinion and have brought more.

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Same here Neil I have up my stake. Did you see what an a j bell analyst said ? Copied from sharecast.

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Undoubtedly the whole management team and their advisors have made a pigs ear of corporate and governance so far but this can be fixed with a good chairman.

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I had previously held and sold THG for a modest gain, and have just bought some more again at todays bottom (I hope).

I agree, corporate governance has been crap and there is a bit of an overreaction.

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Just some thoughts on a reasonably good trading update today.

POSITIVES

Analysts Target Revenue achieved.
Casflow neutral for Q4, I had feared cashburn.
Ingenuity revenue £240k/website vs £170k Q3.
Organic Growth c£340m (21.25%)
M&A Growth c£260m (16.25%)

NEGATIVES

EBIDTA missed. Advised 7.4,-7.7% (Analysts 7.9%)
No mention of new Chairman
No mention of Beauty Spin Off
No mention of Softbank Option

Giving the trading headwinds for all retail (high St and online) I think they were a pretty solid set of results. At the very least I would have expected them to be SP neutral, so a near 10% drop was a right kick in the whatnots !!

I’m now 20% underwater on THG, but I intend to sit it out and hope that sentiment turns.

After £1bn infrastructure investment and 3000 new employees in 2021, the company is advising 22-25% growth for FY22 with improving margins. So EBITDA for FY22 could be around £220m on £2.7bn Rev.

It’s currently trading at about x1 Revenue, which seems like it must be the bottom.

THG Beauty Revenue totalled £1.1bn for FY21 and MM has previously stated it would be spun off in H122. So what’s it worth as a standalone ? Todays SP says it’s worth £1.05bn ???

I still think THG will be taken private, and its more likely the longer the SP stays at these depressed levels. I’m just hoping the buyout price will get me back above water.

Good Luck to all holders, as I said previously, it’s never boring with THG.

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Quick question - What determine the buyouts price of the company going Private?

It’s ludicrous to see the market response today. I am however disappointed that they haven’t updated everyone on their chairman search, the long they don’t it leans to your point of view that they’re going to go private / move to a US listing.

@ShaidK A buyout offer is submitted to the board who decide what’s in the best interest of all investors. If they recommend an offer it carries a lot of weight when the shareholders vote. We’re not able to vote at the moment so will have to watch from the sidelines.

@ShaidK

I posted that back in early Dec, based on yesterday’s close we would be looking at £2.38 - £2.85.

Just ballpark figures with no scientific basis.

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If that the case I make a tiny profit at least - Average £1.85 per Share

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Starting hope for bad news to see if the price goes up!