THG trading in line plus "sensible and value-adding" deal with Frasers

(Alliance News) - THG PLC continues to head in the right direction, according to analysts at Liberum.

The broker commented after the Manchester-based e-commerce retailer issued a trading update and unveiled a tie-up with Sports Direct owner, Frasers Group PLC.

THG said guidance for the financial year remains unchanged.

The company stated further progress has been made in the first half of 2024 in line with previous revenue guidance, and said the second quarter will represent the third consecutive quarter of year-on-year revenue growth.

Performance is underpinned by positive trading within the Beauty, external Ingenuity and offline Nutrition businesses, THG said, which have helped offset continuing FX headwinds within Asia.

Further, THG entered a multi-year partnership with Frasers Group, which also owns Jack Wills and Flannels.

This includes the integration of Frasers' customer credit and loyalty proposition, Frasers Plus into THG's Ingenuity platform.

Frasers will also buy THG's luxury brand portfolio including Coggles.

THG said as part of the deal a range of Myprotein products would be launched in store at Sports Direct.

"Continued growth in Beauty, underlying momentum improvement in Nutrition and Ingenuity are key take-aways from recent trading," analysts at Liberum said.

Nutrition continues to be held back by FX but second half in-country manufacturing will address this, the broker added.

While revenue guidance remains unchanged at 2% to 5%, Liberum thinks the company will ultimately be judged on earnings before interest, tax, depreciation and amortisation and free cash flow progress. Here, the broker sees no changes for now.

While FCF generation is limited now, Liberum thinks there is a clear path to improvement as profit margins improve over-time and capex demands recede.

Liberum reiterated a 'buy' rating.

Jefferies also reiterated a 'buy' rating.

It described the trading update as "solid," and the partnership with Frasers as "sensible and value-adding".

"The Frasers agreement marks another win for the business,

building on recently launched partnerships," Jefferies said, noting deals with H&B and White Stuff.

"We continue to believe THG offers an impressive

stable of market-leading strategic assets, a recovered revenue trajectory, and demonstrable progress in margin recovery," Jefferies said.

Shares in THG rose 1.5% to 62.75 pence in London on Monday. Shares in Frasers Group rose 3.1% to 896.50p.

By Jeremy Cutler, Alliance News reporter

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