Online retailer The Hut Group has seen its share price continue its upward trend over the past week by adding 1.5% so far today, on top of an over 4% gain yesterday, after upping its annual sales forecast. The decision was taken after the company posted quarterly results, its first as a public company, that showed growth of almost 40% compared to the same period a year earlier. The September IPO which valued the company at £5.6 billion, is London’s largest of not only 2020, but since Royal Mail’s 2013 listing.
The company has raised its full year guidance to revenues of between £1.48 billion and £1.52 billion, from a pre-float forecast of £1.43 billion. Third quarter revenue came in at £378 million, representing year-on-year growth of 38.6%. Over the first half, year-on-year growth was 35.8%. The group’s beauty and nutrition business performed particularly well, with growth of over 40%. It accounted for a little over £300 million of the total £378 million in sales.
The Hut Group was founded in 2004, with the Manchester-based ecommerce operation originally selling DVDs online. It now owns around 200 websites which sell beauty, health and nutrition brands, as well as selling its ecommerce system to third parties through its platform technology business THG Ingenuity. Client include Nestlé. The technology unit now accounts for just under 10% of total revenues, with year-on-year growth also sitting at around 10%.
Some stock market observers and analysts raised eyebrows during The Hut Group’s IPO at the company’s ‘alternative’ approach to corporate governance. Founder Matthew Moulding holds the titles of both chief executive and executive chairman and has been given a ‘golden vote’, that allows him to veto any attempted takeover bids, ensuring he retains control over the company. He’ll also be paid £19.4 million a year in rent by the company, after striking a deal to become its landlord ahead of the IPO.
While an arguably similar ‘founder-centric’ approach to governance provoked outrage, ultimately dooming the proposed WeWork IPO last year and pushing the coworking spaces management company to the brink of bankruptcy, investors were ready to swallow the conditions of The Hut Group’s IPO.
The fact that the company turns a strong profit and is growing quickly, as opposed to burning through hundreds of millions of dollars a year, was presumably enough for investors to overcome any qualms. It did, however, mean that the company could only apply for a standard, rather than premium, listing which excludes The Hut Group from eligibility to join the FTSE 100. On market capitalisation, it would have gone straight into the benchmark index at its next revision.
Mr Moulding has stated that he has no intention of giving up either his dual role as chief executive and executive chairman of the company, and more specifically his golden share, in order to qualify for FTSE 100 inclusion. He told The Times:
“It’s only got one purpose and that is to allow me personally to block any hostile takeover of the business. I’m far too passionate about keeping this business in the UK on the UK market and not taken over by an international party.”
However, The Hut Group did yesterday move to address other governance concerns expressed by investors by announcing that independent special advisors are to be appointed to its board committees. They will include former Deloitte senior audit partner Damian Sanders as well as Adam Waller and Alan McGill, who are both partners at rival ‘big four’ auditors PwC. An independent non-executive director will be appointed before the first anniversary of The Hut Group going public.
The move to appoint special advisers has been praised by analysts, with Wayne Brown of stockbroker Liberum commenting that it demonstrated “strong willingness by the group board to improve governance and allay shareholder concerns”.
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