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Aug 27, 2020
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Hut Group confirms float plans, reveals explosive growth

Aug 27, 2020

The Hut Group confirmed what had been widely expected on Thursday morning — that it’s going to float on the London Stock Exchange. Or at least that it’s “considering proceeding with an initial public offering” as it capitalises on rapid expansion and some stallar 2020 sales figures.

The Hut Group is planning an IPO valuing it at £4.5 billion - The Hut Group

The group is now a major name in beauty and wellness e-tail and said the plan “reflects the achievements of the past but also our strong belief in the significant potential for THG in the future”.

So what would the IPO involve? It aims to raise gross proceeds of around £920 million and the firm’s target valuation would be £4.5 billion. It’s planning to have a free float of at least 20% of its issued share capital.

The directors “believe that the offer would further support THG's growth plans by increasing [its] public profile and brand awareness as well as providing a base of long-term shareholders, whilst also providing potential liquidity opportunities for shareholders”.

Founder and CEO Matthew Moulding said that the brands the firm owns give it “leading strategic positions in prestige beauty and nutrition” and its tech and business model also help to give it “significant growth opportunities”. In 2019 it achieved year-on-year revenue growth of 24.5% to reach £1.1 billion, with adjusted EBITDA of £111.3 million.

The Lookfantastic owner sells both its own brands and over 1,000 third-party brands and last year, more than 610 million visits were made to websites on the THG Ingenuity platform while more than 80 million units were dispatched using its infrastructure.

The THG Ingenuity platform — an end-to-end D2C e-commerce solution for consumer brand owners — is hugely important to the firm, making it more than just a retailer.

Ingenuity’s clients include Nestlé, Procter & Gamble, Walgreens Boots Alliance, Coca Cola, Johnson & Johnson, Clorox, L'Occitane, Homebase and PZ Cussons. The platform is rapidly scaling and secured £215 million in life-of-contract revenue in the first six months of this year across a wide range of categories including beauty, healthcare, petcare, confectionery, sports nutrition, baby, cleaning, gaming and homeware, “which demonstrates the wide addressability of the solution”.

Looking specifically at the firm’s THG Beauty ops, its websites such as Lookfantastic, Skinstore and Mankind, plus its retail of more than 850 third-party brands, have led it to believe that it was the world's largest online pureplay prestige beauty speciality retailer in 2019, based on revenue.

Around 64% of Lookfantastic sales in 2019 were outside the UK too, “reflecting the success of the THG Ingenuity platform in internationalising brands”. In 2019, Lookfantastic experienced strong growth across all territories, with 32 of the top 40 territories for THG Beauty Retail experiencing year-on-year revenue growth in excess of 30%. 

Its growth was spread across both more mature markets like the UK (up 52%), Germany (+36%), Italy (+91%), and Spain (+54%), and markets further afield in which it has less of a history. These included Korea (+84%), Singapore (+72%), Japan (+167%) and Thailand (+280). It continued to gain market share from both online and traditional retail competitors.

And most important of all for those who might invest in the firm, as well as the impressive results for 2019, the company said on Thursday that it has “experienced an acceleration in growth during 2020, with revenue of £676 million, up 35.8%” year-on-year.

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