British e-commerce company THG, formerly The Hut Group, is preparing to demerge its technology arm, THG Ingenuity, as it aims to strengthen its balance sheet.
In a security filing, the retailer revealed that it is “actively undertaking detailed work to review potential structures to facilitate the demerger of THG Ingenuity”.
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The proposed demerger has received structuring tax clearances from HMRC [His Majesty’s Revenue and Customs – the British tax office] and is expected to require shareholder approval.
No timeline for the completion of the process has been provided.
In the first half (H1) of the fiscal year 2024, THG Ingenuity reported a total revenue of £305.8m ($403.3m), alongside an improved adjusted earnings before interest, taxes, depreciation and amortisation margin of 3.6%.
THG shares fell by more than 12% following the announcement, as reported by CNBC.
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By GlobalDataTHG CEO Matthew Moulding said: “Finally, after extensive discussions with shareholders over the past 12 months, THG is progressing options to demerge THG Ingenuity, leaving our highly profitable and cash-generative global beauty and nutrition businesses within THG PLC.
“The appropriate tax clearances have been received, while the necessary separation work has previously been undertaken.”
THG, which was valued at $7bn when it was listed on the London Stock Exchange in 2020, has undergone restructuring to address its loss-making operations.
The potential demerger would leave THG with its beauty and nutrition segments, including online brands Lookfantastic and Myprotein.
THG is also seeking to transfer its listing to a new regime for commercial companies, which could potentially enhance passive investment flows and liquidity.
Despite the positive performance of THG Ingenuity, THG’s total revenue in the first half of fiscal 2024 saw a 3.6% decline to £934.0m from £969.3m in the same period of 2023.
The retailer saw its operating loss decrease to £84.4m in the half-year ended 30 June 2024, compared to £99.5m in H1 FY23.
THG ended the first half with a net debt of £350.5m.
In June 2024, THG signed a deal with Frasers Group, owner of Sports Direct, to sell its luxury goods websites, including the well-known Coggles brand.
