6th Apr 2023 10:21
(Alliance News) - THG PLC shares surged on Thursday after the company revealed it landed a 10-year Ingenuity platform deal with a fragrance firm.
THG has had somewhat of a torrid time as a listed company, but with the help of Thursday's share price rise, its stock is up more than 50% year-to-date.
Shares traded 7.9% higher at 68.71 pence each in London on Thursday morning.
The Manchester-based e-commerce retail firm announced a 10-year pact with beauty and fragrance company Maximo Group Ltd, which operates websites including allbeauty.com and fragrancedirect.co.uk.
The partnership will initially focus on re-platforming All Beauty and Fragrance Direct to the Ingenuity platform as part of Maximo's strategic growth plans.
THG Ingenuity will also become Maximo's key UK operational partner, THG said, providing warehouse and fulfilment services from the second quarter of 2023. This will involve providing website services, warehousing and fulfilment, and end customer delivery services through THG's network of couriers.
THG expects the partnership to add over GBP150 million in annual gross merchandise value to the Ingenuity platform, with the ambition to re-platform the site by the end of the second quarter.
Liberum said Thursday's news of a "major client win [is] an important positive".
"This is a positive sign which shows that the shift in Ingenuity strategy to focus on bigger clients is starting to bear fruits. THG had previously highlighted that it expects to add over GBP1 billion incremental GMV to Ingenuity in 2023, of which GBP150 million has been delivered today and increases confidence in the delivery of that pipeline. We believe larger scale client wins are key to a re-rating as it allows the group to leverage the excess capacity and meaningfully improve free cash flow and returns on capital," analysts at Liberum commented.
The broker maintained a 'hold' recommendation for the stock, "but further Ingenuity wins, and more clarity on the economics of the contracts with bigger enterprise clients, would make us more positive".
It has a 55 pence price target.
In late-March, Kelso Group Holdings PLC said it increased its stake in THG and urged the company to take steps to improve its market value. Kelso is an investment firm focused on UK small and mid-cap companies.
In January, Kelso purchased 5.0 million shares for a 0.4% stake in THG. Kelso said it paid an average of 54.5p per share, so forking out around GBP2.7 million in total.
On Thursday, Kelso said it has purchased an additional 2.4 million shares in THG, bringing its total interest to 7.4 million shares. It did not say how much it paid for the new THG shares.
"We believe that 2023 will be a positive year for THG as many of the operational headwinds experienced during 2022 continue to reverse," Kelso said.
"Whilst we commend THG's board and management's efforts, we believe there are more actions they can take to ensure the share price reflects what we strongly believe to be intrinsic value. Specifically, we would like to see the board deliver on commitments made to investors."
Kelso said it continues to "urge" THG to review strategic options, alongside focussing on cash generation. As part of this, Kelso asked THG to consider a share buyback programme, as it views THG's share price as "undervalued".
The investor also wants THG to move to a premium listing on the London Stock Exchange from its current standard listing.
Back in 2021, THG had said it planned just such a move, but a year and a half later, it remains a standard listing. The 'golden share' held by Matthew Moulding, the founder and chief executive, prevented a premium listing at the time of its initial public offering. This means THG is excluded from FTSE UK indices.
By Eric Cunha, Alliance News news editor
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