The Hut Group, or THG as it’s become, floated at 500p last September, has been as high as 800p and closed on Monday a shade below 600p. In other words, it is a business the market finds hard to value, which is perhaps not surprising since there aren’t many like it.
THG is an e-commerce marketing platform with a bits-and-pieces beauty and nutrition operation that moves in the baffling world of social media influencers. And it is led by its photogenic founder, Matthew Moulding, who insists on adding a golden share to his 25% holding.
Here, though, is one way to demonstrate value – get SoftBank of Japan to pay $1.6bn (£1.1bn) for a 19.9% stake in Ingenuity, the tech-heavy division of THG that is possibly the hardest to price. THG has been talking up Ingenuity’s potential as a cultivator of other people’s brands but the rate of sales growth has looked pedestrian. Masayoshi Son, though, clearly likes the look of it. Softbank’s investment values a single division of THG at $6.3bn, or £4.5bn, versus THG’s entire market value of £5.8bn.
A vote of confidence from Son isn’t a guarantee of anything since Softbank provoked worldwide hilarity by swallowing the WeWork nonsense. But serious sums are going into THG. The other part of the transaction is $730m from Softbank into the main quoted company.
None of it will make THG easier to understand as its “expedites potential collaboration” with affiliates of its new Japanese partner. But a wild ride to somewhere clearly lies in store. This is deal-making on steroids.
Doorstep lender Provident Financial won’t be missed
Farewell, Provident Financial as a doorstep lender, pursued by regulators, claims management companies and customers seeking redress. One can feel sympathy for the 2,100 employees whose jobs are under threat from the closure of the division, but the business itself won’t be missed.
For some of its 141 years in the doorstep game, “the Provvie” had a weak claim to performing a necessary function within the financial services industry – the provision of short-term credit, albeit at gruesome interest rates, to sub-prime borrowers left behind by mainstream lenders. It’s hard to make an argument for survival today. Life has moved on.
The Financial Conduct Authority, quite rightly, has toughened its definition of “affordability” checks in an attempt to raise standards. Provident may feel it has been regulated out of the market, but one can equally regard it as a sign of progress that its business model no longer works.
Provident can fall back on its Vanquis credit card operation and its Moneybarn car finance unit. It will probably do fine in the “mid-cost” market, where APRs are about 50%, as opposed to up to 1,500% at the doorstep end. One cannot, though, call the exit from doorstops graceful.
Provident’s inadequate farewell present to its former customers is a take-it-or-leave-it £50m pot of money to cover mis-selling claims. The FCA refused in March to give its blessing because the sum won’t be enough to cover the likely redress, but the company has declined to improve the terms. That detail rather sums up the unsatisfactory saga.
As ever, there will be a worry that the hole created by the departure of a large sub-prime lender will be filled by something worse. The FCA says only “a very small proportion” of customers unable to access high-cost short-term credit have turned to illegal loan sharks in the past. One hopes that continues to be the case. If so, there’s there’s no need to mourn Provident Financial’s departure.
Savills moves bonus goalpost despite missed targets
This week’s big pay quarrel comes at AstraZeneca, but let’s not overlook Savills on Wednesday. It is understood the estate agency has been awarded a rare “red-top” warning from the Investment Association, one grade more severe than the “amber” dished out to the pharma firm.
Of two dubious manoeuvres on pay, the more inflammatory move by Savills’ remuneration committee was to award bonuses to executives even though financial performance targets were missed by a mile.
Savills was supposed to achieve underlying profits of £120m as a minimum under the annual “performance-related profit share arrangement”. In the event, the company did £84.7m but the pay committee decided the top duo were terribly unlucky because of Covid so should have a prize anyway.
That decision was worth about £350,000 to the chief executive, Mark Ridley. It looks doubly cheeky because he still collected £500,000 by meeting 90% of his separate “key objectives”. Pay chief Richard Orders thinks the £350k top-up is “fair and appropriate” because Savills gained market share from rivals. Come on, you’ve moved the goalposts after the final whistle.