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Director Deals: President Adds Abandoned THG to Basket

Tongues have been talking about a takeover of The Hut Group for months, but even that speculation hasn’t been able to dispel the gloom surrounding the digital retailer.

The owner of sites Lookfantastic and MyProtein is now trading within a tenth of its post-IPO highs of over 800p as investors grow increasingly concerned about governance and strategy. Although THG recorded 35% sales growth in 2021, a broader cooling in internet retail stocks has seen it join Ocado, AO World and Asos on the list of London’s best-selling stocks in 2022 .

Shares fell to an all-time low of 69.6p per share in June after two suitors separately scrapped plans to buy the company. Property tycoon Nick Candy’s investment firm and a consortium led by Belerion Capital, whose previous offer of 170p per share in May was rejected for “significantly undervaluing” the company, had been considering offers. As neither came to the table by the June 16 deadline, it would be six months before they could make another offer.

In the meantime, THG faces a “difficult road to breakeven cash”, according to Numis, thanks to rising costs and already low cash margins of 7.4% in its beauty e-commerce business. , while young technology logistics division Ingenuity is still lifting off the ground. S&P Global Ratings downgraded its outlook for THG to “negative” in May, citing likely pressure on profitability over the next 12 months.

Nevertheless, new THG chairman Charles Allen took advantage of the group’s low valuation to buy nearly £1m worth of shares. The former ITV boss bought 1.15million shares at 86p each, although their value fell 12% in the days after the deal.

Allen joined the board in March to strengthen THG’s governance, after founder Matthew Molding came under fire for holding the positions of executive chairman and chief executive together, as well as owning a “preferred stock” that allowed him to veto takeover bids. Moulding, which has a 23.5% stake in the company, has previously hinted at ambitions to take over THG.

Lords Group chief executive buys as CFO sells

Investors scouring market announcements for director bids hoping to learn something about insider opinions on a company’s performance might have been a bit confused by Lords Group Trading’s latest statement.

On the one hand, chief executive Shanker Patel bought more than £480,000 worth of shares directly, plus another £240,000 through a pension fund controlled by himself and other family members , bringing their combined stake to almost 52%.

On the other, chief financial officer Chris Day and group acquisition and integration director Tim Holton each sold stakes worth £650,000.

Earlier filings partly explain this.

Lords Group, majority-owned by the Patel family, is a building materials distributor that opened its first branch in 1984 and has grown quite rapidly through acquisitions, completing eight major deals between 2016 and its IPO on Aim in July last year.

The IPO saw the company raise £30 million and existing shareholders get rid of £22 million worth of shares. Two years before the float, Lords implemented a company stock option plan to incentivize certain key employees to stay with the company. Those options vested on June 30, giving Day more than 2.6 million shares and Holton nearly 1.37 million. The two decided to cash in 924,000 shares each for what the company called “personal planning reasons.”

Lords released a strong set of early results for 2021 in May, with pre-tax profit more than doubling to £8m on a 26% rise in revenue to £363m.

Although the Construction Products Association predicts a slowdown in the repair, maintenance and improvement market the company serves, in a business update ahead of its AGM last week, Lords reiterated its forecast that revenues would increase by about 20% and adjusted pre-tax profit by 57 percent this year.

Like other builder traders, trading in Lords shares has been difficult. After debuting at 95p, they peaked at 148p in September, but have since halved in value.