Shares in The Hut Group, or THG (THG) as it is officially called, ticked up 10.6% to 737.3p on Monday after the recently-listed beauty website owner upgraded annual revenue guidance in its maiden trading update.

Having seen revenue growth accelerate in the third quarter, THG flagged ‘continued momentum’ in the important fourth quarter to date. This has given management the confidence to upgrade annual sales guidance to a range of around £1.48 billion to £1.52 billion.

That is up from IPO guidance of around £1.43 billion and means the company is on course to generate heady full-year sales growth of between 30% and 33%.

SPRINTING AHEAD

A global technology platform specialising in taking brands direct to consumers, THG sells beauty products through Lookfantastic and other websites and is also the company behind the Myprotein sports nutrition brand.

It has enjoyed a strong start to life as a publicly traded company with the shares trading 47.5% above their 500p IPO issue price. Today’s update for the third quarter to September has served to foster further positive sentiment towards the stock.

CRUCIAL CHRISTMAS QUARTER

In order to maintain this momentum, THG will need to see strong demand across its health supplement and beauty product sites through the rest of the fourth quarter, an important one as it typically accounts for just under a third of annual revenues and includes the Christmas trading period and the upcoming Black Friday sales event.

Yet the longer-term excitement around the story is based on THG’s Ingenuity platform, which has been likened to Ocado’s (OCDO) online solution for global grocery companies, and basically sees THG picking up the IT and logistical requirements of the likes of PZ Cussons (PZC), Hotel Chocolat (HOTC:AIM) and Nestlé.

‘Our strong organic revenue growth across all divisions, numerous THG Ingenuity partnership deals, and the recent acquisition of luxury skincare brand Perricone MD, demonstrates our strategic direction and progress in the period,’ commented chief executive and executive chairman Matthew Moulding.

He also stressed THG has ‘a very strong balance sheet, enabling us to further invest across each of our growth pillars.’

THE EXPERT’S VIEW

AJ Bell investment director Russ Mould explained that for now, the Ingenuity platform ‘makes only a modest contribution and if the business is to hold on to its premium valuation the market will expect to see rapid growth in this area. The good news is that, after minimal first-half growth, a double-digit advance was conjured in the third quarter.’

Mould added that ‘nagging corporate governance concerns linked to areas like a lack of independent directors and the structure of its bonus schemes are unlikely to be entirely erased by the appointment of outside special advisors to the Audit & Risk and Sustainability committees.’

READ MORE ON THE HUT HERE

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Issue Date: 26 Oct 2020