Annual losses at Apollo target THG soar above £500m

THG losses nearly quadrupled last year after sales growth slowed significantly and administrative costs soared. 

Matt Moulding’s e-commerce retailer declared a £540million loss for 2022 on Tuesday, against a £138million loss the previous year, reflecting impairment charges of £270million within its beauty and technology segments.

THG shares fell back sharply, paring back gains achieved on Monday following news the group was the subject of a ‘highly preliminary and non-binding indicative’ takeover proposal from Apollo Global Management.

Results: A day after confirming it was the subject of a takeover approach, e-commerce retailer THG declared a £540million loss for 2022, against a £138million loss the previous year

THG told investors that outgoings were accelerated by ‘unusually high’ commodity prices, particularly whey, as well as takeover costs and rising depreciation costs related to investment in new warehouses.

Though the group partially mitigated these extra outlays with price hikes, margins were impacted by maintaining prices in its nutrition business at reasonable levels.

Total revenue grew by 2.7 per cent to £2.24billion, partially reflecting tough comparative periods the prior year when Covid-19 rules meant customers could not buy many products in stores.

For the first quarter of 2023, THG’s turnover slumped by 8.6 per cent, largely due to a weaker performance from its beauty division.

THG shares were 17.3 per cent lower at 79.2p on Tuesday afternoon, having soared by almost half on Monday.

It follows a troublesome two years for THG, which owns the Dermstore, Cult Beauty and Myprotein brands, as it has grappled with corporate governance concerns, a slowdown in online shopping and pressure from short-sellers.

Since listing on the London Stock Exchange in September 2020, its share price has plummeted by more than 80 per cent, making it a ripe target for an acquisition bid.

THG’s co-founder and chief executive Moulding has said the listing was ‘not an experience I’d recommend to anyone’ but has rejected any takeover approaches so far for the firm.

In April 2022, the Burnley-born boss said THG had received some ‘unacceptable’ offers from third parties that did not ‘reflect the fair value of the group‘.

Julie Palmer, a partner at corporate restructuring specialist Begbies Traynor, said: ‘THG was a lockdown darling thanks to booming online retail but adjusting to a normalising world has proved a painful process for the business.’

She added: ‘THG founder Matt Moulding has made no secret of his dislike of life as a listed business and the controls it brings.

‘Should Apollo’s approach turn into a firm offer, then it could be a relief not only for him but also THG’s long-suffering shareholders.’

Apollo’s interest in the retailer comes amid a frenzy of foreign interest in British public companies, which are seen as relative bargains when measured against their US counterparts.

After turning down four previous proposals, John Wood Group has agreed to have discussions with Apollo after the latter made a £1.7billion approach for the oilfield services provider.

Veterinary products maker Dechra Pharmaceuticals, property fund Industrial REIT, and payment services provider Network International are also currently targets of potential takeovers.

Among the firms to have fallen into overseas ownership over the last year have been fashion seller Ted Baker, repairs specialist Homeserve, and tech firm Aveva, which was bought by French conglomerate Schneider Electric. 

This post first appeared on Dailymail.co.uk