THG seeks £75m to fund Ingenuity spin-off

THG is tapping investors for £75 million to fund the spin-off of its loss-making technology arm Ingenuity into a separate entity, as it readies its core business for a shot at the FTSE.
In a statement issued after trading closed on Thursday night, the Manchester-based ecommerce group said that the equity raise, through a share placing and subscription offer, would provide Ingenuity with medium-term funding to develop into a standalone company.
• THG plans tech services spinoff to fix balance sheet
Ingenuity, which has 4,000 employees and 12 distribution centres globally, provides technology to support the online operations of third-party retailers including Holland & Barrett, The Range and L’Oréal.
The demerger would leave THG holding the beauty and nutrition business that is behind the brands MyProtein and Cult Beauty, in what it called a “simpler, cash-generative business capable of paying future dividends”.
Once considered the crown jewel of THG, backed by Softbank and valued at £4.5 billion, Ingenuity has yet to turn a profit. THG believes the demerger will simplify its structure and boost its balance sheet.
Matthew Moulding, chief executive of THG, formerly known as The Hut Group, has committed the company to invest £10 million as part of the raise, which will be open to new and existing shareholders.
The announcement came as THG revealed a fall in sales over the latest quarter. Total group revenues were 5.2 per cent lower at £442.8 million for the three months to September 30 with growth in beauty and Ingenuity offset by a 13.1 per cent drop in nutrition.
Moulding said: “The short-term disruption from the major rebrand of MyProtein is now behind us, and we were pleased that in September [THG] Nutrition delivered its best sales performance since January.”
THG, which was co-founded by Moulding in 2004, has had a rocky ride since floating on the London stock market at a £5.4 billion valuation in 2020. It has lost about 90 per cent of its market valuation since going public amid disappointing sales and a series of rows about corporate governance. Moulding has previously stated that he regretted listing the business.
The company, which also owns the brand Lookfantastic and CityAM newspaper, wants to transfer its listing to a category that would allow it to be included in FTSE benchmarks. THG is currently part of a “transition” category following the introduction of new rules from the Financial Conduct Authority which came into effect in July.
It wants to move to the equity shares (commercial companies) category, which it said would allow it to be considered for inclusion in the FTSE UK index series, raising its visibility and hopes to complete this transfer by March next year.