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.
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.
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.
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.
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.
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
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.
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.
- 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.