Jefferies cuts targets for THG, but stays upbeat on long-term potential

Jefferies has cut its target price for ecommerce group THG on the back of weaker-than-expected numbers for its Nutrition business, but said it was encouraged by improving momentum within the division going into the second half.

The broker also hailed strong performances from the Beauty and Ingenuity arms in the first half, and expressed optimism surrounding the company's plans to demerge tech platform Ingenuity into a separate entity.

Jefferies cut its target price from 105p to 100p after THG said that full-year EBITDA would be at the lower end of market expectations, but the broker still kept a 'buy' rating on the stock.

The Nutrition division, which owns performance supplements brand Myprotein, saw revenues fall 7.5% and EBITDA drop 58% on the back of yen weakness, whey protein price inflation and falling selling prices.

"There are positives though, with: 1) offline continuing to perform strongly, 2) the rebrand now largely complete, 3) Nutrition set to exit Q3 having returned to growth, and 4) local manufacturing having now commenced in Japan, providing a partial hedge going forwards," Jefferies said.

As for THG's planned demerger of Ingenuity, the broker labelled it a "potentially very interesting development that could leave a listed business consisting of two high quality, strategically relevant, cash-generative assets in Beauty and Nutrition".

Jefferies added: "Clearly the relative capital structures would be an important consideration, but we see this as potentially unlocking considerable value for investors in the standalone ecommerce operations."

The market reacted badly to the results on Tuesday, with the stock down 10% at 57.85p by 1236 BST.