THG ramps up governance overhaul and begins search for independent chair
UK e-commerce company THG said this morning it has appointed a consulting firm to begin a search for a new independent chair for the company, in its latest attempt to appease City investors with doubts about the governance and transparency of the business.
Alongside its third quarter results this morning, the group announced it had enlisted Russell Reynolds Associates for the job, further to its “ongoing review of corporate governance arrangements”, which it claimed was part of the “step-up” process as it seeks premium status on the LSE.
It also announced it was bringing its major backer SoftBank an inch closer with the appointment of the Japanese group’s MD Dr Andreas Hannson, in a move that signals the SoftBank deal is still on track.
Overall group sales increased by 38 per cent on a constant currency basis in the third quarter, amid a governance saga that has filled City investors with doubts about the transparency of the business.
Group revenue rose to £507.7m in the third quarter from £378m in same period last year, driven by the company’s THG Beauty and THG Nutrition arms, which comprise brands such as Lookfantastic, Glossybox and Myprotein.
The third quarter also saw the group acquire rival beauty e-commerce brand Cult Beauty for £275m, which it said it had migrated onto its Ingenuity platform “ahead of schedule”, and had already optimised in terms of a 30 per cent uplift in conversion rates, a 6 per cent uplift in average order values, and a 36 per cent improvement in page load times.
CEO Matthew Moulding said the Cult Beauty onboarding had been down to the “resilience of the infrastructure and the expertise of our digital talent”, which had “seamlessly migrated” the business in under 10 weeks.
A focus on THG Ingenuity
THG’s white label business Ingenuity, which builds e-commerce platforms for consumer goods groups, has been at the heart of mounting investor doubts that sent shares tumbling up to 36 per cent this month.
Their main concern centers around the group’s lack of transparency around the profitibality of its Ingenuity arm, but when CEO Matthew Moulding hosted a “capital markets day” in an attempt to set the record straight, his attack on short sellers during the meeting had the opposite effect and shares nosedived.
In the group’s latest attempt to address these concerns, the results today zoomed in on THG’s Ingenuity arm with a separate commerce update.
The group said it was launching new regular KPI metrics for the previously opaque business, to “enable an improved understanding of the high repeat, high growth nature of the Ingenuity Commerce revenue model.”
THG Ingenuity reported revenue growth of 131 per cent year-on-year in the third quarter, which the group said was driven by the acquisition of a record number of new clients in the three months to 30 September (up 50 per cent on the interim results.)
During the quarter, the business branch gained 44 new clients across a “broad range of consumer sectors” with a range of contracts spanning three to 10 years, including Japanese beauty and household products conglomerate Kao Group, which it said would roll out multiple brands including Molton Brown across the UK and internationally over the next five years.
Looking ahead, THG said it had a “strong pipeline” of new client acquisitions for the Ingenuity business during the fourth quarter, as well as an order book of 280 new websites for existing clients, which will drive the number of live websites it provides for brands up from 163 to 400 by the end of the year.
Governance overhaul
The continued governance overhaul comes after the company announced last week that Moulding and his wife Jodie had dropped a pledge of shares in the business as collateral against a £100m personal loan with Barclays.
Now that Moulding has dropped the pledge, it removes the prospect of any THG shares being sold to Barclays if he defaults on the loan, in the latest effort to establish some more distance between the co-founder and the business and get investors back on side.
A few days earlier, THG announced that Moulding would surrender his controversial “golden share” in the company, which gave him the right to veto any hostile takeover bid in the next three years.
More to follow.