Rising British ecommerce star The Hut Group is set to go on the acquisition trail after announcing it has beefed up its budget for buying new businesses to expand its empire. The Manchester-based company said in a statement that quickly growing revenues during the pandemic, which has accelerated the trend towards online shopping, meant it was increasing its acquisitions budget.
Myprotein, the supplements brand that The Hut Group is best known for, saw revenues rise by 41.5% over the year that ended December. That took its total revenues to £1.61 billion over 12 months.
The Hut Group’s acquisition has not simply been topped up with some additional spending power but multiplied fivefold from £50 million a year to approximately £250 million a year. Another major factor in the decision is a feeling the environment has improved leading to more and better opportunities for deals.
Since going public in September The Hut Group has proven to be highly acquisitive with a total of 7 takeovers completed in as many months. £251 million was spent on American skincare website Dermstore.
The Hut Group is under the almost complete control of co-founder Matt Moulding who holds the roles of both chief executive and executive chairman. He also controversially holds a ‘golden vote’ with a dual-class share structure giving his shares greater voting rights. He holds a voting majority designed to allow him to veto any aggressive takeover bid despite owning just 24.1% of the company’s equity.
Mr Moulding has said the beauty sector will continue to be one that acquisitions are looked for in and that targets would be businesses that could improve the group’s sustainability. A recent example is the £4 million purchase of a plastics recycling business in early April. He admitted the pandemic and its impact on shopping habits had been an unplanned for boost to the company, creating positive tailwinds it was now looking to capitalise on. Of ecommerce’s share of retail he comments:
“I think we will continue to increase our share.”
Despite already raising its growth forecasts several times since listing last September, The Hut Group has this time chosen to maintain them at their previously stated level of between 30% and 35%. But it was also noted first-quarter performance had exceeded expectations.
Having listed in September at a valuation of £4.5 billion, The Hut Group’s current £6.8 billion market capitalisation represents huge early share price growth despite recent declines. But progress to date has been enough to trigger an £800 million share bonus for Mr Moulding. He yesterday announced a promise to give away £100 million of that windfall to charity.
Despite the successful year, The Hut Group did report a £481.8 million operating loss for 2020. However, the majority of that was accounted for by a £331.6 million share-based payment charge relating to Mr Moulding’s bonus and £200 million paid out to long-term employees as a bonus. The rest is accounted for by £14 million paid in fees to advisors working on its stock market listing, £39.2 million in pandemic-related costs and £105.1 million in asset writedowns and sale-and-leaseback charges.
Without those one-off, non-cash adjustments the company says it would have made an operating profit of £45.5 million.
Investors attach the majority of The Hut Group’s current valuation to its technology business rather than direct ecommerce activities. It licenses out its Ingenuity ecommerce technology platform to clients which are mainly traditional retailers and brands building up their own online presence and ecommerce activities.
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